AI Hyperscalers' Debt Binge Blamed for Pushing Long-Term Treasury Yields Higher

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Federal Reserve Chairman Kevin Warsh identified the surging debt issuance by AI hyperscalers as a contributing factor to elevated long-term Treasury yields, with the 10-year note breaking above 5 percent for the first time since 2007. Corporate bond issuance by the five largest American hyperscalers jumped from an average of $28 billion annually between 2020 and 2024 to $121 billion in 2025, according to Bank of America Securities. Morgan Stanley estimates global AI-related debt reached $236 billion by late spring 2025 and could approach $570 billion through 2026. The borrowing surge is driven by capital expenditure on data centers and AI accelerator hardware that now consumes nearly all operating cash flow for several cloud providers. Analysts warn of a reflexive dynamic in which the AI sector's own debt issuance raises the benchmark discount rate, thereby increasing the financial hurdle its investments must clear to be justified.

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ProgrammingDEV Community ·

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ProgrammingDEV Community ·

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ProgrammingDEV Community ·

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