Artificial Intelligence

Another week, another hyperscaler deal. Market participants have by now become accustomed to the steady flood of issuance from the large tech players as they look to build out their Artificial intelligence (AI) infrastructure to manage the ever-increasing demands for compute

Elon Musk’s SpaceX has given markets a rare opportunity to test risk appetite across credit and equity in recent days, having followed its blockbuster initial public offering (IPO) with a bond market debut.

We have had an eventful few weeks of AI-driven volatility in markets, with markets seemingly swinging from “everyone’s a winner” to “everyone’s a loser” faster than technological progress itself.

Oracle returned to the bond market yesterday, just five months after its $18 billion September jumbo deal, finally removing the cloud of uncertainty around supply that has hung over the credit.

For much of the past year, the AI story in markets has been one of unrestrained optimism. Firms have been racing to spend on chips, infrastructure, and data centres, and equity valuations have generally rewarded those with the boldest capital expenditure plans.

There is an emerging sense of unease in the markets around the scale and productivity of corporate investments in AI. As fixed income investors, not equity or tech managers, we will not aim to assess the longevity or possible applications of these nascent technologies, and nor should we opine on when or by how much equity markets might go up or down.

Oracle priced an $18bn six-tranche (5yr/7yr/10yr/20yr/30yr/40yr) bond deal which was increased from an initial $15bn on the back of exceptionally strong demand. It is the latest sign that the AI investment boom, long the focus of equity markets, is now spilling into credit.