The stock market selloff has raised fears the AI boom is running on borrowed time. But it’s also running on borrowed money, and Wall Street is less eager to provide a seemingly endless stream of debt.
As so-called hyperscalers plow hundreds of billions of dollars a year into AI infrastructure, they have increasingly tapped bond markets to raise capital. That’s in addition to drawing on cash flows and issuing new equity.
In fact, since the start of 2025, Alphabet, Meta, Amazon and Oracle alone have issued more than $300 billion in bonds, according to Bloomberg calculations.
AI chip leader Nvidia also issued $25 billion in bonds last month, marking its first such sale in five years. And SpaceX, which is now an AI player after acquiring xAI, sold $25 billion in bonds just days after its record IPO that raised $86 billion in stock.
AI’s insatiable demand for cash means the debt binge isn’t expected to slow down anytime soon. The top five hyperscalers are expected to issue $300 billion annually in the coming years, up from $175 billion in 2026. That doesn’t include SpaceX. JPMorgan estimated it will see $375 billion in debt proceeds from 2026 to 2030.
But just as AI debt supply soars, investors appear to be losing their appetite.
Amazon had to sweeten a “surprise” $25 billion bond sale earlier this month by offering 18 to 21 basis points of extra yield on its longest-date debt. That’s because demand dipped, with orders at just 2.5 times the bonds on offer, down from 3.2 times in March.
“Investors are pushing back,” Bank of America wrote in a note. “The deal should also inject even more uncertainty into the hyperscaler/AI supply outlook.”
Torsten Slok, chief economists at Apollo Global, pointed out in a note on Wednesday hyperscalers’ cover ratio—investor orders per every dollar of bonds—has plunged.
It was nearly 5x in February 2026 but tumbled to below 2x in July, “suggesting investors may need wider spreads to absorb additional hyperscaler supply,” he warned. By contrast, the ratio for investment grade bonds overall only slipped by about half a point in that span.
The dollar bond market, the world’s largest, has become so saturated tech giants have been issuing debt in other currencies. As a result, issuers will likely have to provide more attractive terms, meaning their borrowing costs will rise.
AI-related debt must also compete against the flood of debt coming from the Treasury Department as the federal deficit continues to deepen and is on track to hit $2 trillion this fiscal year.
“The current hyperscaler widening is a byproduct of the high-grade investor community trying to rationally price in an accelerating pace of issuance,” JPMorgan strategists wrote in a note on Tuesday.
Bearishness over bond issuance is spilling over to the secondary market. For example, SpaceX’s debt has sold off, sending yields higher, and is now trading at levels comparable to junk bonds.
This adds to the carnage stock investors have been suffering. SpaceX stock has plunged below the IPO price of $135 a share and is now 45% below its high, which briefly put its market cap above Microsoft’s.
But the bulk of the selloff has been concentrated in once-highflying chip stocks. Even Nvidia hasn’t been spared and was overtaken by Apple on Friday as the world’s most valuable company.
The latest trigger was the release of the new Kimi K3 model from Chinese AI startup Moonshot, which claimed it outperformed models from OpenAI and Anthropic.
While Kimi K3 is costlier than other Chinese rivals, it’s still much cheaper than top U.S. models, and the surprise performance data raised new concerns that the AI boom’s spending orgy is becoming harder to sustain.
If users shift to lower-cost Chinese AI models, then U.S. AI companies may generate less revenue and cut back on their capital expenditures.
The effects would ripple across the U.S. economy. AI-related investment accounted for more than half of real GDP growth in recent quarters. If AI investment declines, it could generate a mild recession, Citi Research warned on Friday.
“Consumer spending has also been supported by the run-up in equity prices. Spending has increased faster than incomes, meaning the savings rate has fallen to historically low levels,” Citi added. “A significant decline in equity prices would push the savings rate higher and spending lower, further contributing to a slowdown in economic growth.”
