AI-Driven Data Center Expansion Sparks Global Debt Market Transformation

The AI revolution is reshaping global capital markets as hyperscalers race to fund data center construction, with JPMorgan Chase & Co. estimating a $5 trillion funding requirement over the next five years—potentially rising to $7 trillion—to meet surging demand . This unprecedented scale of investment, driven by computing, real estate, and energy constraints, is forcing firms to tap every corner of debt markets, from investment-grade bonds to private credit and government-backed financing .

JPMorgan strategists, led by Tarek Hamid, highlight that investment-grade bonds alone will need to contribute $1.5 trillion, while leveraged finance is expected to cover $150 billion. However, even with $40 billion annually from data-center securitizations and high-yield bonds, a $1.4 trillion funding gap remains, which the report attributes to private credit and public-sector support . The bank projects $300 billion in high-grade bonds for AI data centers in 2025, representing nearly 20% of issuance in that market, which Barclays Plc forecasts will expand to $1.6 trillion .

Market dynamics have already accelerated: Meta Platforms Inc.’s $30 billion bond sale in October 2025 set a record for the largest order book in the high-grade bond market, while Oracle Corp. secured $18 billion in funding for a data center campus . These transactions underscore investor appetite despite warnings about potential overcapacity. JPMorgan strategists caution that the AI boom mirrors the telecom bubble of the late 1990s, where excessive investment led to defaults and valuation collapses .

Conversely, BofA Securities has advised investors to short bonds of major hyperscalers, including Amazon, Alphabet, Meta, Microsoft, and Oracle, citing insufficient cash flow to sustain AI capital expenditures. Over $120 billion in bonds have been issued recently, with credit spreads widening by 30 basis points to 50-80 basis points . While BofA acknowledges high valuations and delayed rate hikes as temporary stabilizers, it warns of systemic risks if cash flow mismatches persist .

The dual narratives of exuberance and caution reflect broader macroeconomic tensions. JPMorgan’s analysis suggests the AI-driven data center boom could singlehandedly reaccelerate growth in bond and syndicated loan markets . Meanwhile, BofA’s bearish stance highlights vulnerabilities in the current debt structure, particularly for firms like Amazon, which derives 17% of revenue from Amazon Web Services but faces insider selling and valuation pressures .

Globally, the demand for data centers is constrained by physical infrastructure, yet market participants remain optimistic. JPMorgan’s report notes that “the question is not ‘which market will finance the AI-boom?’ Rather, the question is ‘how will financings be structured to access every capital market?’” . This shift signals a transformation in how corporations and investors approach capital allocation, with AI infrastructure becoming a cornerstone of economic growth.