- US-listed companies have issued $54 billion in convertible bonds year-to-date, up 43% from the same period in 2025 and the highest volume since the start of the Covid-19 pandemic, driven by AI infrastructure spending and chip demand.
- Many AI companies are paying 0% coupons on convertible bonds, with investors accepting rock-bottom rates because AI stock volatility makes the embedded conversion option highly valuable.
- The ICE BofA US Convertible index is up more than 20% this year, outpacing the S&P 500 (+10%) and Nasdaq (+13%) as of Tuesday — making converts one of 2026’s best-performing asset classes.
- Risks are real: the crypto convertible boom of 2024 reversed sharply as digital asset prices fell; analysts warn that overexposure to AI is the market’s key vulnerability if sentiment turns.
What Happened?
AI companies are flooding the convertible bond market at a pace not seen since the pandemic. US-listed companies have issued $54 billion in convertible bonds so far this year — up 43% from 2025 — with AI infrastructure players like CoreWeave leading the way. CoreWeave recently raised $4 billion in converts at a 1.75% coupon; cybersecurity and cloud company Akamai went further, issuing $3.5 billion at 0% interest across 2030 and 2032 maturities with conversion premiums of 35-42.5% above its stock price. The logic for issuers is straightforward: high stock prices, tight credit spreads, and elevated share volatility combine to make convertible debt the cheapest form of capital available. For investors, the instruments offer bond stability with equity upside if AI stocks continue their run.
Why It Matters?
The convertible bond boom is another signal of how thoroughly the AI infrastructure build-out is reshaping capital markets. Companies that would have once relied on equity issuance or traditional debt are finding converts uniquely attractive in the current environment: they can borrow at 0-2% rather than issuing stock at potentially dilutive levels, while investors are happy to accept low coupons for the AI optionality embedded in the conversion feature. The ICE BofA Convertible index is up over 20% this year — beating both the S&P 500 and Nasdaq — reflecting strong demand. But the precedent is cautionary: in 2024, convertible issuance surged in crypto before falling sharply when Bitcoin prices dropped, wiping out investor gains. A similar narrative pivot in AI would hit the converts market hard.
What’s Next?
Bankers and investors expect the momentum to continue as more AI companies make their stock-market debuts. CoreWeave has specifically noted that new IPOs will likely tap the converts market as a follow-on financing tool. The key risk, as one strategist noted, is market overexposure to a single theme: “The risk is we are getting a little overexposed to AI. But that’s part of the convert market — this market finances high-growth names.” As long as AI stocks remain elevated and credit spreads stay tight, the conditions for near-zero-cost issuance remain intact. A meaningful correction in either would quickly change the calculus for both issuers and investors.
Source: The Wall Street Journal
