AI Juggernaut Rumbles on Even as Markets Whipsaw
(Bloomberg) -- The artificial intelligence credit juggernaut keeps pushing forward as the relentless demand for exposure to the industry trumps fears that the conflict in the Middle East is causing energy prices and inflation to rise.
Despite the geopolitical headwinds, Wall Street was still able to successfully stitch together tens of billions of dollars in funding to underpin the AI boom in recent weeks. The tumult may even be making AI-linked high-grade debt more appealing this year as investors seek havens.
“We’re in one of those sort of self-fulfilling bull markets for AI,” said Brett Kozlowski, a portfolio manager at GW&K Investment Management LLC. “When issuance is there, we’ll fund it and by funding it they’ll issue more.”
Large cash balances and low leverage levels at so-called hyperscalers such as Meta Platforms Inc. are providing solace to credit investors even as spreads remain narrow. With markets now calmer, Morgan Stanley is sticking with a pre—war estimate of $400 billion of high-grade debt issuance this year to back hyperscaler and other AI-related investments, the investment bank told Bloomberg News.
Jumbo bond sales from hyperscalers alone could exceed $100 billion over the rest of the year, some bankers estimate, adding to the more than $80 billion in dollar-denominated debt already raised by Oracle Corp., Alphabet Inc., and Amazon.com Inc. in the first quarter.
“If you’re a high-quality investment-grade issuer, you’re not going to have trouble because there’s just such a bid for that, especially in this environment,” said Kelly Kowalski, head of investment strategy at MassMutual.
Outside of the high-grade public debt markets, CoreWeave Inc. continued its borrowing spree by selling $1.75 billion of junk bonds after striking a new deal to supply artificial intelligence computing power to Meta. Pacific Investment Management Co., meanwhile, is planning to sell on some of its $14 billion in debt financing for an Oracle data center project in Michigan through a private market for large institutional managers.
That potential deal is part of a wider offering for AI-related facilities. A group of banks is disposing of $3 billion of loans for a data center in Ohio backed by Meta, while Societe Generale SA is mulling a significant risk transfer of some of its exposure to the asset class to free up capital for new deals.
The success of the AI debt sales contrasts with wider jitters in credit. Blue-chip borrowers were forced to seize brief, fragile windows of calm to raise funds over the past month as the market was far from uniformly smooth. The final week of March saw more than $5 billion in outflows from US high-grade debt, the largest since April 2025 and the first weekly outflow since November, according to LSEG Lipper data.
“The investment grade market has been priced for perfection and recent geopolitical noise has been a reminder that things can come out of nowhere and derail funding plans,” said Meghan Graper, global head of debt capital markets at Barclays Plc. Still, “some of the hyperscaler supply you’ve seen is indicative of borrowers getting ahead and taking advantage of attractive funding conditions.”
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Week In Review
On the Move
- Barclays rehired Nick Fall from Goldman Sachs to help lead its US leveraged finance capital markets business. Fall will become co-head of the business alongside Alex Ranson, who joined from UBS Group AG last year.
- JPMorgan Asset Management appointed Miles Courage as head of private markets EMEA and global head of product for private markets. Courage was most recently chief operating officer and head of product development for JPMAM’s Global Special Situations business.
- Dennis Cornell, head of client coverage for the Americas at Apollo Global Management, has left the firm.
- Amar Reganti, a managing director and fixed-income strategist at Wellington Management, will move to Textron Inc. to help manage the aircraft maker’s $15 billion of pension fund assets.
- Ares Management Corp. hired former Goldman Sachs banker E.G. Morse as partner and head of Asia credit. Based in Hong Kong, Morse will replace the firm’s current head of Asia credit Edwin Wong, who is retiring by the end of June.
- Murilo Kuhl, a former Morgan Stanley managing director, was hired by Banco Itau BBA as head of international debt capital markets and loan syndication.
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