Tech debt surge strains bond markets ahead of midterms

Tech stocks and corporate bonds faced renewed pressure in late October as investors grew wary of the massive capital expenditures required for artificial intelligence infrastructure. Major tech firms, including Amazon, Alphabet, Meta, and Oracle, saw their shares decline, mirroring a broader drag on the corporate bond market that has persisted for months.

The bond market is increasingly scrutinizing the creditworthiness of tech giants, with AI-related debt supply exceeding $400 billion this year, more than double the volume of 2025. While Microsoft secured favorable pricing for a new $25 billion bond, other companies face higher borrowing costs as investors demand greater compensation for the risk of heavy debt issuance.

Federal Reserve Chairman Kevin Warsh noted that interest rates are affecting nearly all economic sectors, highlighting a market that is increasingly discriminating between different types of investments. With the U.S. Midterm elections approaching, political decisions regarding datacenter construction and AI spending could further influence capital flows and market volatility.

Read the full story at morningstar.com.