AI Debt Surge: Hyperscalers Compete With Europe For Capital

Four of the five largest US technology companies have issued approximately $250 billion in US dollar bonds since the start of 2025. These firms, Amazon, Alphabet, Meta, and Oracle, have also sold an additional €37 billion in euro-denominated debt. This borrowing strategy places them in direct competition with European sovereign nations and corporate entities for a finite pool of investor capital.

Microsoft, the last of the major tech firms to enter the market, recently completed a $25 billion bond sale in dollars. Financial institutions project this trend will accelerate. Goldman Sachs estimates that total new bond sales by AI hyperscalers will reach $420 billion next year. ING, a Dutch bank, expects approximately €60 billion of that total to be issued in euros.

This influx of corporate debt is straining European public finances. France currently holds public debt equal to 119% of its gross domestic product. Its deficit remains above 5%. Over the past six months, yields on French 10-year government bonds have climbed from roughly 3.7% to nearly 5%. The French government’s annual interest bill is projected to rise from €79 billion to €91 billion next year, surpassing €100 billion by 2028.

European Central Bank economists noted in August that the euro bond market is adapting to the presence of AI giants. They warned that this activity could make it harder for other economic sectors to access finance. The central bank also questioned whether financial markets can smoothly handle such large, concentrated debt inflows. This dynamic may force international lenders, such as the European Union, to pay higher costs to borrow.

Viktor Hjort, global head of credit strategy at BNP Paribas, describes the situation as bond abundance. He stated that the presence of hyperscalers in the euro bond market is already creating competition between corporations and governments for fixed income funds. Hjort noted that bond yields jumped in the previous month due to rebounding energy prices and France’s political crisis. He said these factors revealed the growing competition for capital.

Goldman Sachs reported last week that rising interest costs are reducing earnings at European companies. Among firms in the Stoxx 600 index, interest costs as a share of sales have increased by nearly half since 2022. This change has cut earnings by more than 5% over that period. The bank suggested that European firms may face pressure to cut investments in plants and research to prioritize loan repayments.

Local governments in Europe may also feel the impact. A study for the OECD found that in Belgium, Germany, Spain, Sweden, and Canada, borrowing costs for cities and regions tend to rise where AI job vacancies are most prevalent. Christos Makridis, the study’s co-author, noted that this trend is the opposite of findings in the United States, where AI investments are linked to lower borrowing costs for municipalities.