Yahoo Finance
June 3 (Reuters) - The artificial-intelligence boom already has fueled a record stock-market surge.
Now it's driving up long-term Treasury yields too.
Meta Platforms, Oracle and other technology companies have raised $250 billion in debt markets globally this year, according to Morgan Stanley, borrowing at a scale that would have been hard to imagine only a few years ago.
The recent surge in AI-related infrastructure investment is partly behind the May rout that pushed 30-year Treasury yields to their highest level since 2007, analysts say, alongside inflation fears and shifting expectations for Federal Reserve policy.
Treasury yields have come down from their May highs but remain above the levels where they began the year, reflecting in part the wave of bond issuance.
"We're talking $750 billion, $850 billion of capex spending on an annualized basis, and it's expected to ramp up to close to a trillion next year," said Thomas Urano of Sage Advisory in Austin.
"It's kind of like thinking about a federal stimulus package or some kind of infrastructure spend at a federal level." Corporate borrowing to pay for AI investment could help shape Treasury valuations for years to come, investors say.
Hyperscalers are raising vast sums to finance data centers, power systems and computing capacity, and long-term financing offers them several advantages - though Alphabet's $80 billion stock-sale announcement shows the firms have multiple fundraising options.
Data centers combine assets with very different lives: AI chips may need to be replaced every few years, but buildings, land, power connections and other infrastructure can last 20 to 30 years.
Companies building long-lived assets have a strong incentive to lock in long-term fixed-rate funding.
Oracle, once a relatively minor issuer of long-term debt, has become one of the largest suppliers of duration risk - a measure of interest-rate exposure watched closely in the bond market and sought after by long-term investors such as insurance companies - in the investment-grade universe, said Srini Ramaswamy, a senior financial economist at the Federal Reserve Bank of Dallas.
Ramaswamy estimates that AI-related issuance accounts for roughly 15% of the duration supplied by total Treasury issuance.
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