The euro-area corporate bond market has acquired a new class of regular customer: American technology companies borrowing to pay for artificial-intelligence infrastructure. In a blog post on Sept. 2, the European Central Bank warned that the trend is large enough to reshape the region’s debt markets, reported Reuters.
Google, Amazon and Microsoft, among the biggest spenders on AI data centers, have turned to the euro market as one source of funding for their build-outs. Analysts estimate that the AI-related capital expenditure of these companies could reach as much as $1 trillion by 2028, the ECB said, and a growing share of that spending is being financed with bonds sold in Europe.
The stock of outstanding euro-denominated bonds issued by U.S. technology companies is still modest, around 40 billion euros. But those companies now account for close to 10% of new issuance in the market, and Amazon and Alphabet have become the largest U.S. corporate issuers in the euro zone this year, according to the ECB’s analysis.
The blog warns that a continued expansion of technology debt could push up financing costs for every borrower in the market, including governments. It also flags the possibility of spillover into sovereign and supranational debt markets, where the European Union and its agencies sell bonds that compete for the same pool of investor money.
Credit ratings are a separate concern. Rating agencies assign some of the biggest U.S. technology companies top-tier grades, and investors have treated their debt as a safe way to earn a spread over government bonds. The ECB blog cautions that these optimistic ratings may not withstand the test of time if the returns on AI projects disappoint and the borrowing remains on the books.
Why would American companies borrow in euros at all? Debt capital markets bankers point to several motives: diversifying an investor base dominated by U.S. buyers, tapping European demand for high-grade corporate paper, and, at times, securing cheaper funding than in dollars. For issuers with global revenue, including large European sales, a euro liability is a natural match.
European investors, for their part, have been hungry for the paper. Insurance companies, pension funds and asset managers in the euro area have long complained that the region produces too few large corporate borrowers, and U.S. technology names offer the scale and credit quality that European issuers often lack. That demand has made the market unusually receptive to the new supply.
The ECB’s concern is what happens when that supply grows large enough to matter at the margin. Every euro of technology debt absorbs demand that might otherwise go to government bonds, bank paper or the bonds of the EU itself. If issuance keeps climbing, the price of that absorption shows up in yields across the curve, the blog argues.
Sovereign borrowers are the most sensitive to the shift. Euro-area governments have large refinancing needs, and several are running deficits that require steady access to markets. A permanent new bid for investor funds from highly rated corporate issuers could raise the cost of that borrowing at the margin, complicating fiscal plans that were drafted under the assumption of low rates.
The blog also raises a question that rating agencies rarely address in public: whether the enormous sums being spent on AI will earn their keep. The technology companies justify the spending on the ground that AI demand is growing quickly and that falling behind in the build-out is riskier than overspending. If those assumptions prove wrong, the debt taken on to fund the projects would remain, and the ratings that made it cheap to issue would look generous.
For the ECB, the issue sits at the intersection of two of its jobs. The bank watches financial stability, which includes the smooth functioning of bond markets, and it conducts monetary policy, which depends on the transmission of its rates through sovereign and corporate yields. A market distorted by a handful of very large issuers complicates both tasks.
The blog stops short of calling for restrictions on issuance, and European officials have little appetite for limiting the access of U.S. companies to the region’s capital markets. The message is aimed more at investors and at the rating agencies, urging them to look past the appeal of a familiar name and to weigh the concentration risk that a few borrowers now carry.
Analysts said the warning reflects a broader change in the AI investment cycle. For the first two years of the boom, equity markets absorbed the cost of the build-out, as investors funded companies on the promise of future profits. Now the spending has grown large enough that debt markets are carrying a share of it, and central banks are beginning to treat the financing side of AI as a policy question in its own right.
The euro market is not alone in absorbing this supply. U.S. investment-grade issuance has also swelled as technology companies borrow to fund data centers, and banks have arranged record amounts of loans for AI projects. But the euro zone is a smaller, shallower market, which makes the entry of very large issuers more visible and, the ECB argues, more consequential.
Amazon and Alphabet have issued in euros for years, so their presence is not new. What has changed is the pace. The ECB estimates that the flow of new issuance from U.S. technology companies has accelerated as their AI budgets have grown, and it sees no sign that the pace will slow before the end of the decade. The bond market’s capacity to absorb that flow, the blog concludes, has become a constraint in its own right.
