- AI-related borrowers now account for almost half of year-to-date gross issuance of non-financial U.S. investment-grade debt with maturities beyond 15 years, PIMCO said in a Nov. 10 note cited by CNBC. Lotfi Karoui, a PIMCO managing director and multi-asset strategist, said that issuance now weighs heavily on the broader corporate-debt market and is pushing investors to look beyond Big Tech for credit diversification.
- AI hyperscaler debt issuance is projected at around $250 billion in dollar-denominated bonds this year, according to Goldman Sachs forecasts cited by CNBC. Estimates for the wider AI ecosystem — including chipmakers, utilities and data-center developers — range from $300 billion to $570 billion.
- “For most of the past 3 years, the AI investment boom has been an equity story, but it is increasingly becoming a bond-market story,” said Kevin Thozet, a member of Carmignac’s investment committee. “The numbers are becoming too large for bonds investors to ignore.” Concerns about an AI build-out slowdown after Democrats’ midterm victory add to the headache for long-duration investors, particularly as longer-dated Treasurys have been volatile for much of 2026.
- Karoui’s preferred diversifiers are agency mortgage-backed securities, higher-rated private mortgage bonds and emerging-market debt. PIMCO and Bloomberg data showed a 33-basis-point pickup in agency MBS over U.S. investment-grade corporate spreads as of Nov. 5, without the same exposure to corporate borrowers. Dollar-denominated emerging-market investment-grade “semi-liquid” infrastructure deals have offered a median pickup of around 40 basis points this year versus plain-vanilla EM bonds, he said.
What Happened?
Karoui argued that financials offer a large pool of investment-grade exposure with less direct sensitivity to the AI capital-expenditure cycle, and that “old economy” sectors such as energy can play a similar role in high yield, but he called both expensive, with spreads tight relative to their risk-adjusted return potential. In AAA-rated non-qualified mortgage tranches, he said the potential benefits likely outweigh the risks, which he described as more about repayments taking longer than expected than about borrowers failing to pay, and that newer deals are structured to repay senior investors more quickly.
Why It Matters?
The concentration is the story. If almost half of long-dated non-financial IG supply is now tied to AI-related borrowers, index-bound credit portfolios are being pushed into a single theme whether they intend to be or not. That makes a slowdown in the build-out — or a funding squeeze if equity markets stay risk-off after the Nvidia shock — a bond-market problem, not just a stock-market one. Agency MBS and selected EM debt are PIMCO’s way of buying duration and carry without adding more hyperscaler exposure, but they are not risk-free substitutes: EM still carries political and currency risk, and even high-quality securitized products can extend when rates stay high.
What’s Next?
Investors will watch whether the pace of hyperscaler issuance holds as equity volatility around Nvidia and the midterm outcome complicates the AI trade. Any widening in long-dated IG spreads, or a pullback in issuance from the $250 billion hyperscaler forecast, would test how much of this year’s credit supply was dependent on a stable equity bid. PIMCO’s 33-basis-point MBS pickup and 40-basis-point EM infrastructure pickup will only remain compelling if those spreads are not competed away as more credit money chases the same diversifiers.
Affected Tickers and Coins: LQD, MBB, EMB, NVDA
Source: CNBC
