The Zhitong Finance App learned that Wells Fargo said that tech giants competing to build artificial intelligence infrastructure are hitting the upper limit of their ability to finance in the global bond market.
Maureen O'Conner, global head of Wells Fargo's senior debt syndication business, said, “We have indeed experienced a wave of supply shocks.” “In the investment grade (IG) market, we are approaching the limit of market capacity.” What she was referring to was the $15 trillion investment-grade bond market.
O'Connor pointed out that investors showed resistance to the scale and frequency of single bonds issued by large technology companies. She said that a single transaction of more than 25 billion US dollars is being punitively priced in the secondary market, and the issuer does not recommend entering the bond market more than twice in a year.
In an interview, she said, “We do realize that a single sale at around $25 billion has become a 'pain point' for investors to feel struggling.” “To a certain extent, this has put a ceiling on the amount of capital these companies can directly borrow from the investment-level market.”
O'Connor pointed out that the five largest hyperscale cloud service providers have issued more than 200 billion US dollars in bonds this year. If you add data center-related transactions between Nvidia (NVDA.US) and SpaceX and other companies, the scale will rise to about 400 billion US dollars.
Wells Fargo is the sixth-largest underwriter for high-grade US bonds this year. The company has underwritten technology debt deals for companies such as ORCL.US (ORCL.US), Alphabet Inc. (GOOGL.US), and Microsoft (MSFT.US).
O'Connor believes there will be more room for off-the-shelf graphics processing unit (GPU) and tensor processing unit (TPU) debt financing next year. She anticipates that this type of financing will be shorter than the latest round of AI bonds — the latter will have an average term of about 15 years in 2026.
“A large portion of this type of financing will fall on the short end of the yield curve and is a type of instrument with a weighted average term of about three years,” O'Connor said.