Markets Insight: No worries about AI – investors are scrambling for new bonds from Big Tech

In the midst of the crash on the stock markets, the big tech companies issued bonds worth almost $75 billion. But that is not a contradiction, says Andrea Cünnen.

The fears surrounding artificial intelligence (AI) have left deep red traces on the stock markets. In the past four weeks, the Nasdaq 100 technology index in the USA has fallen by around 14 percent. The victory of the Democrats, who are more critical of AI, in the US midterm elections has further strengthened the sell-off.

Previously, concerns about high AI spending and some disappointing quarterly figures had also put some big tech stocks under heavy pressure. Just in this phase, Microsoft, Oracle, Alphabet, Meta and Apple ventured back into the bond market. Since the end of October, they have raised a total of almost $75 billion with bonds over many different maturities.

And with great success: Investors placed purchase orders totaling around $320 billion. This initially sounds like a contradiction, but it isn't.

Investors in the bond markets simply ask different questions than shareholders. Stock prices are primarily determined by the actual and expected profits of companies. When the earnings outlook worsens, stock buyers become more skeptical.

Bondholders, on the other hand, are primarily interested in whether the debtors remain solvent, i.e. pay their interest and repay the bonds at the end of the term.

With Microsoft, Alphabet, Meta and Apple there is little doubt about this. Corporations can no longer fully finance their investments from current cash flow. But their balance sheets are solid. The rating agencies rate their creditworthiness from “AAA” at Microsoft to “AA-” at Facebook parent Meta as excellent to very good.

Only Oracle, with a credit rating of “BBB-” from S&P, is on the verge of being a weaker debtor. However, the software company has promised not to issue any new bonds in the next few years, but rather to replace bonds that are due to expire.

Nevertheless, there is also a certain level of uncertainty among bond investors. Companies have to lure them with high interest rates. For the dollar bonds, each with a term of ten years, Microsoft offered a yield of 5.6 percent, Meta of 6.6 percent, Apple of 5.4 percent and Oracle of even 8.0 percent. Alphabet and Meta also issued bonds in euros; the yields for nine-year bonds were 4.9 and 4.5 percent.

These are significant risk premiums compared to US government bonds and German federal bonds and also compared to bonds from other companies with comparable credit ratings. And risk premiums have continued to rise in recent months.

This needs to be monitored, but skepticism about the bonds cannot be derived from this. Bond strategists like Srikanth Sankaran from the US bank Citi explain the high risk premiums primarily with the large supply.

In fact, Big Tech dominates the market for new bonds. The large US tech companies have issued bonds worth around $440 billion in various currencies since the beginning of 2025 and will probably need even more in the future. It is understandable that they have to dig deeper into their pockets.