WireJuly 31, 2026 at 9:30 PM
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The corporate borrowing underpinning the artificial intelligence boom has reached unprecedented levels, with hyperscalers and associated entities issuing $225 billion in bonds through the first half of 2026, a 973.7% surge from the prior year. The torrent of debt, tallied by S&P Global, puts the sector on pace for a record $400 billion in issuance this year, as American firms like Amazon escalate capital expenditure plans to dominate the global AI race.
Wall Street is beginning to demand a higher premium for the flood of paper. S&P Global warned that market participants are growing leery of rapidly rising leverage from issuers previously prized for strong, reliable cash flow. The crowding out effect is set to intensify pressure on American taxpayers as the Treasury Department is simultaneously forced to finance a federal deficit approaching $2 trillion this fiscal year. Unlike previous eras, the Federal Reserve is no longer absorbing supply, leaving domestic private investors to underwrite the government's obligations alongside corporate debt. RSM chief economist Joseph Brusuelas flagged that current robust demand for both public and private debt cannot endure indefinitely, forecasting that lenders will eventually demand steeper premiums from both the federal government and private borrowers.
The visible bond issuance obscures a vastly larger, hidden liability financing the buildout. An analysis of financial disclosures reveals that so-called hidden debt at the five U.S. tech giants has exploded by eight times in four years to a staggering $1.65 trillion. This shadow debt, consisting largely of long-term purchase agreements for semiconductors and lease obligations to data center operators, does not appear on corporate balance sheets but is noted in financial annotations. Moody's estimates over $820 billion of these off-balance-sheet deals are tied to data centers still under construction, presenting a massive, debt-equivalent liability that will crystallize on balance sheets as facilities come online. The accounting mechanisms are legal, but the scale poses a growing risk to American economic stability should the flow of capital financing this buildout suffer a correction.