US Tech Firms Issue $250 Billion in Bonds, Raising Borrowing Costs for Europe

Amazon, Alphabet, Meta, and Oracle have issued approximately $250 billion in dollar-denominated bonds since the start of 2025. These four companies, often referred to as Big Five hyperscalers alongside Microsoft, have also sold €37 billion in euro-denominated debt. Microsoft recently joined this borrowing wave with a $25 billion bond sale.

The influx of corporate debt is intensifying competition for investor capital in European markets. Goldman Sachs projects that total new bond sales by AI hyperscalers will reach $420 billion next year. Dutch bank ING estimates that about €60 billion of that amount will be issued in euros.

This increased supply is straining public finances in countries like France, Germany, and Italy. In France, which holds public debt at 119% of GDP and runs a deficit above 5%, yields on 10-year bonds have climbed from roughly 3.7% to nearly 5% over the past six months. The French government expects its interest bill to rise from €79 billion to €91 billion next year, surpassing €100 billion by 2028.

Viktor Hjort, global head of credit strategy at BNP Paribas, described this trend as bond abundance. He stated that the presence of hyperscalers in the euro bond market is already high enough to create competition between corporations and governments for available fixed income funds. Hjort noted that bond yields jumped last month due to rebounding energy prices linked to the Iran war and France’s political crisis, which revealed growing competition for capital.

European companies are also feeling the impact of rising interest costs. Goldman Sachs analysts reported that interest costs as a share of sales for firms in the Stoxx 600 index have risen by nearly half since 2022. This increase has cut earnings by more than 5% over the same period, potentially forcing companies to prioritize loan repayments over investments in new plants, equipment, and research.

The pressure extends to regional and local governments in Europe. A January study by the Organization for Economic Co-operation and Development compared local bond markets in Belgium, Germany, Spain, Sweden, and Canada. The research found that where AI adoption spreads fastest, measured by the share of AI-related job vacancies, borrowing costs for cities and regions tend to rise. Christos Makridis of Arizona State University, a co-author of the study, noted that this contrasts with the United States, where AI investments are linked to a lower cost of borrowing for municipalities.

Economists at the European Central Bank warned in August that while the euro bond market is adapting to AI giants, the concentration of debt inflows could make it harder for other economic sectors to access finance. They cautioned of a potential spillover to the sovereign and supranational segment of the bond market. This means governments and international lenders, such as the European Union and the European Investment Bank, could face higher borrowing costs as US tech firms continue to issue billions in new bonds next year.