How AI giants could raise the cost of borrowing in Europe
Four of the Big Five hyperscalers, Amazon, Alphabet, Meta and Oracle, have issued about $250 billion in dollar bonds since the start of 2025, according to a tally of US regulatory filings by AI Industry Reviews, an independent platform. They have also sold €37 billion ($41 billion) of bonds in euros. Microsoft recently joined with a $25 billion dollar bond sale.
Goldman Sachs projects that new AI hyperscaler bond sales will reach $420 billion next year. ING, a Dutch bank, expects about €60 billion of that to be issued in euros.
DW reports that this could pressure European governments and companies. France's public debt is 119% of gross domestic product, and its deficit is above 5%. Yields on French 10-year bonds rose from roughly 3.7% to nearly 5% over the past six months. DW cites figures showing France's interest bill rising from €79 billion now to €91 billion next year and more than €100 billion by 2028.
Viktor Hjort, global head of credit strategy at BNP Paribas, told DW that hyperscaler presence in the euro bond market is "already high enough to create competition" for available fixed income funds. He described the phenomenon as "bond abundance."
In August, European Central Bank economists wrote in a blog post that AI giants "could make it harder for other companies and other economic sectors to access finance." They also warned of a "potential spillover to the sovereign and supranational segment of the bond market," which could raise borrowing costs for governments and institutions such as the European Union and the European Investment Bank.
Goldman Sachs warned last week that rising interest costs are hurting European company earnings. Among Stoxx 600 firms, Goldman found that interest costs as a share of sales rose by nearly half since 2022, cutting earnings by more than 5% over the same period, according to the bank's analysts.
A January OECD-commissioned study compared local bond markets in Belgium, Germany, Spain, Sweden and Canada. Co-author Christos Makridis of Arizona State University told DW: "Whereas in the United States, my research has found that AI investments are linked to a lower cost of borrowing for municipalities, the opposite appears to hold in several European countries."
DW notes that AI bonds are not the only cause of Europe's fiscal strain, but their added demand could increase pressure next year.