For most of the past decade, the world's largest technology companies had little need for the bond market. They generated more cash than they could spend. That has changed quickly, and the timing could hardly be worse for borrowers.
Start with the backdrop. Government bond yields in the UK and US are at their highest in nearly two decades. The 10-year gilt touched about 5.5% in early October, a 19-year high, and the US 10-year Treasury is around 5%. The main driver is geopolitics. Since the US and Israeli strikes on Iran in February, oil has spent much of the year around or above $100 a barrel, feeding inflation and pushing central banks back towards raising rates. The Federal Reserve raised rates in September, and when it held them on 28 October, two members voted for a further rise. The Bank of England has come under pressure to follow. Add heavy government borrowing on both sides of the Atlantic, and the cost of money has risen for everyone.
Into this market have stepped the hyperscalers: Alphabet, Amazon, Meta, Microsoft and Oracle. Their bond issuance rose from about $17bn in 2024 to $109bn in 2025, and to $194bn in the first half of 2026 alone, according to J.P. Morgan Asset Management.
Meta's latest results show what this means. Free cash flow is the cash a business generates after paying for investment in buildings and equipment: the money left over to pay dividends, buy back shares or repay debt. In the third quarter, Meta's free cash flow was negative $2.1bn, its first shortfall in more than a decade, compared with a positive $10.6bn a year earlier. The advertising business is still growing strongly, with revenue up 26%. But capital spending of almost $35bn in the quarter, mostly on AI data centres and chips, consumed all of the cash it generated and more. Meta is not alone. Alphabet and Oracle also reported negative free cash flow, as did Amazon over the past twelve months, leaving Microsoft as the only one of the five still in positive territory.
Something has to fill the gap. On 26 October, Meta announced plans to raise up to $95bn by selling shares, the largest equity raise in its history. It later lifted the target to almost $98bn. Bond investors were relieved, because every dollar raised from shareholders is a dollar not borrowed. Shareholders, whose stakes will be diluted, were less pleased.
The less visible part of this story is the financing that sits off balance sheet. Meta's Hyperion data centre in Louisiana is funded mainly by $27bn of bonds issued by a joint venture Meta owns with funds managed by Blue Owl. The debt does not appear as Meta's borrowing, yet its credit quality rests largely on Meta: on its lease of the site and on its guarantee of the site's value if it walks away after the initial four-year term. Issuance of asset-backed securities linked to data centres is growing fast, with J.P. Morgan forecasting $30bn to $40bn for 2026. Private credit funds, insurers and pension schemes are increasingly the lenders.
This matters for three reasons. First, credit ratings may flatter the risk. A data centre loan can carry an investment-grade rating because the tenant is a hyperscaler, but the lease may run for far less time than the debt, and the chips the building was designed around may be obsolete long before the debt is repaid. Second, investors may hold more AI exposure than they realise. As hyperscalers issue more bonds, passive bond funds automatically own more of them, adding to the concentration already found in equity indices. Third, the market is becoming less forgiving. Demand for hyperscaler bond deals has thinned in recent months.
None of this means a crisis is coming. These are still among the most profitable companies ever built, and most of their debt is highly rated. But when the world's richest companies start spending more cash than they generate, just as borrowing costs sit near a two-decade high, bond investors should be asking what they are being paid for, and who holds the risk if the AI bet takes longer to pay off than expected.
Will Martindale
Co-founder
Canbury Insights Limited
Will Moderated an excellent discussion on the critical role of the Bond market with David Thompson (Zurich) and Jessica Zarzycki of Nuveen/TIAA read the key takeaways here.
