The artificial intelligence arms race is pushing the US bond market toward a breaking point. SpaceX, Broadcom and Oracle have together sought more than $150 billion in financing within less than a week, and when added to the previously roadshowed $60 billion Broadcom-Anthropic debt package, the borrowing frenzy across the AI ecosystem has left the public bond market increasingly saturated, forcing more and more deals into private credit and off-balance-sheet special purpose vehicles (SPVs).

This wave of fundraising is reshaping risk pricing across the entire credit market. According to Bloomberg data, mega technology bond deals of more than $25 billion each have reached nine so far this year, a record, and the technology sector has become one of the worst performers in the recent credit market. At the same time, Oracle's five-year credit default swap has surged to a record closing high of 261 basis points, SpaceX's five-year CDS broke through 197 basis points to set another record, and even Nvidia, the world's most valuable company, has seen its five-year default probability priced by the market at more than 7%.

Goldman Sachs credit strategist Rich Privorotsky described the situation as a "war for capital" and warned that "the crowding-out effect could be enormous," noting that AI borrowers are willing to pay high single-digit interest rates to secure funds, pushing US Treasury yields higher, with the 10-year yield back at 5.31% and the 30-year hovering near 5.70%.

T. Rowe Price fixed income portfolio manager Steven Kohlenstein put it bluntly: "Risk is increasingly concentrated in a small group of companies, all ultimately tied to the same AI investment cycle, and even if these risks are spread across different issuers, different sectors and different financing structures, correlation risk may not be fully reflected in current valuations."

$150 Billion in One Week: Three Mega Deals Emerge Simultaneously

The sheer scale and rapid pace of this fundraising wave have caught the market off guard.

According to the Wall Street Journal, Broadcom has spent the past several weeks arranging more than $50 billion in financing for OpenAI's custom AI chip project, with Apollo and Blackstone both in talks. At the same time, Broadcom began last week launching syndicated distribution for Anthropic's $42 billion Class A senior secured bonds, while Blackstone separately leads an $18 billion Class B subordinated bond and is contributing $9 billion of its own capital. Bloomberg confirmed the negotiations but noted that "no formal process has been launched," and the two companies may seek "around $30 billion of debt as the next phase of financing."

On Oracle, according to the Wall Street Journal, the company is in talks with Apollo and Goldman Sachs to finance large-scale chip purchases through an off-balance-sheet vehicle, with a structure in which outside investors would fund a separate company to buy chips and then lease them to Oracle. The purpose of this arrangement, according to reports, is to help Oracle "avoid borrowing more money itself in order to control debt costs." The Nvidia chips for a 1-gigawatt data center cost roughly $50 billion to $60 billion, and Oracle hopes to complete the deal within this year.

SpaceX is seeking about $10 billion in bank loans plus $30 billion in investment-grade bonds to purchase Nvidia chips, led by Apollo, with Pimco also in contact. Notably, SpaceX completed an IPO in June this year at an $86 billion valuation, and issued $25 billion in bonds just two weeks later. If it raises another $40 billion this time, cumulative debt financing within four months would reach $65 billion, equivalent to 76% of its IPO proceeds.

Combining the three deals, plus the Broadcom-Anthropic transaction, the chip-related debt lined up across the AI ecosystem in about a week has exceeded $150 billion, with the size of the Oracle deal not yet disclosed.

Bond Market "Jammed": Public Markets Near Saturation, Private Credit Steps In

The public bond market is approaching its carrying capacity, which is the fundamental reason so much of this fundraising has shifted to private credit and SPVs.

According to Bloomberg data, investment-grade and high-yield bond issuance by hyperscalers, data centers and AI infrastructure projects has reached at least $360 billion this year, accounting for 5.8% of total global bond sales, triple last year's 1.9% share. Goldman Sachs credit strategist Adam Crook uses a broader measure, counting total global AI-related debt issuance this year at more than $575 billion, with hyperscalers accounting for only 40% of that.

The Wall Street Journal was blunt about it: cloud providers have "issued hundreds of billions of dollars of bonds for AI buildout, pushing the public debt market to its limits." That is precisely why the new wave of financing has bypassed bond underwriting desks and turned instead to private credit institutions such as Apollo and Blackstone, executed through SPV structures.

Off-balance-sheet debt is accumulating faster than on-balance-sheet debt. What makes chip SPVs unusual is that their collateral is graphics processors, which depreciate far faster than buildings, while some structures pair short-term bank loans with 15- to 19-year leases, essentially betting that companies like Oracle can refinance at current spreads between 2028 and 2032.

Apollo is involved in all three deals this week, having previously participated in Broadcom's June financing platform, xAI's Colossus financing and Nvidia's $500 billion "compute financing platform" launched in August.

Record CDS Levels Signal Credit Risk Repricing

The credit derivatives market has reacted more directly than rating agencies.

According to Bloomberg, Oracle's five-year CDS rose about 10.5 basis points on Thursday to a record high of 261 basis points, with the market-implied five-year default probability now exceeding 20%. SpaceX's five-year CDS jumped from about 181 basis points to 197 basis points, a record high, up about 30% from mid-September and nearly double the roughly 110 basis points at its June IPO. Rating agencies still assign a BBB investment-grade rating, but the CDS market is pricing something very different. SpaceX bonds maturing in 2056 are currently trading at about 85 cents on the dollar.

Oracle's credit condition is particularly noteworthy. Two weeks ago, Oracle's 2056 bonds plunged to record lows after the "Jupiter project" force majeure event, with yields exceeding 8%, wider than the average single-B junk bond. Its 1.3-gigawatt Wisconsin data center campus subsequently ran into problems as well. Of the roughly $80 billion in project debt supporting Oracle's leased data centers, multiple Jupiter loans have fallen to 89 to 91 cents.

Broadcom's five-year CDS widened 3 basis points on Thursday to 136 basis points, also a record.

Allspring Global Investments senior fixed income trader Mark Clegg said:

"Every new financing announcement feels like yet another bidder competing for investors' balance sheets, creating levels of spread volatility that would have been unimaginable a year ago. Some days it feels like the market is holding emergency meetings every few hours to reprice the scale of AI buildout."

Crowding-Out Effect Spreads: Treasuries and Junk Bonds Both Under Pressure

The spillover effects of the AI fundraising wave have spread from the technology credit market to the broader capital markets.

Reuters columnist Wayne Cole noted that "sovereign borrowers are no longer the big players in the market, and AI giants are increasingly encroaching on their territory," with the prospect of corporate bond competition pushing the 10-year US Treasury yield back to 5.31% during Asian trading hours and the 30-year yield hovering near 5.70%.

Goldman Sachs' Privorotsky explained the logic: "If you believe scarce compute can generate a 20% to 30% compounded internal rate of return, you would be happy to borrow at high single-digit rates to build it. But this creates enormous pressure on everyone else, consumers, small businesses, and even governments that built their balance sheets in an era of cheap capital. This may explain why real yields are refusing to come down."

The cracks in the junk bond market are more obvious. According to Goldman Sachs' credit sales strategy team, dollar CCC spreads closed at 998 basis points on Wednesday, up 219 basis points over three months and 123 basis points in a single month, sitting in the 99th percentile of the past year and just 2 basis points away from 1,000. Meanwhile, investment-grade index spreads remain unchanged at 80 basis points.

JPMorgan's chief TMT specialist Brian Heavey also noted this morning that SpaceX's bond financing "continues to weigh on government bonds," with the Russell index underperforming the Nasdaq in 17 of the past 20 trading sessions. This tells the same story in the equity market: go long artificial intelligence, short everyone who needs a loan.

Two Paths Forward, One Unresolved Question

Goldman Sachs' Privorotsky boils the current situation down to a binary fork:

First, AI generates enough organic cash flow to gradually self-finance, making next quarter's hyperscaler earnings critical. Second, capital gets rationed elsewhere and weak links in the economy begin to break.

He added: "We may already be seeing the beginning of this process in CCC spreads."

Wavelength Capital Management chief investment officer Andrew Dassori noted that companies have massive and growing compute financing needs, but with intensifying competition and potential regulatory tightening, revenue growth faces slowing risks. "The market is adapting to these conditions, and you can see it in spread movements and from a volatility perspective."

At present, Oracle has become the weakest link in the entire AI credit chain as seen by the market. Its own balance sheet can no longer support cheap financing, forcing it to "rent" Apollo's balance sheet. OpenAI and Anthropic have no meaningful balance sheet to speak of, and SpaceX has knocked on the capital markets' door three times in four months.

A $50 billion loan arranged for a chip project named "Jalapeno" may be the most vivid footnote to this AI financing frenzy.