SpaceX, Broadcom, and Oracle Issue Massive Bonds! The U.S. Bond Market Is “Overflowing,” “Concentration Is Increasing, Ultimately All Influenced by the AI Cycle”

The AI arms race is pushing the U.S. bond market to the brink. SpaceX, Broadcom, and Oracle have collectively sought over $150 billion in financing within just one week. Coupled with the previously roadshowed $60 billion Broadcom-Anthropic debt, the AI ecosystem’s borrowing frenzy is saturating the public bond market, forcing more deals into the realms of private credit and off-balance sheet special purpose vehicles (SPVs).

This financing wave is reshaping credit market risk pricing altogether. According to Bloomberg data, there have already been nine jumbo tech bond deals (each over $25 billion) this year—a record high—making tech one of the worst-performing sectors in the recent credit market. At the same time, Oracle’s five-year CDS soared to a historic closing high of 261 basis points, SpaceX’s five-year CDS broke 197 basis points for another record, and even Nvidia, the world’s largest company by market cap, saw its five-year default probability priced above 7%.

Goldman Sachs credit strategist Rich Privorotsky described the situation as a “capital arms race” and warned that the “crowding-out effect could be enormous”—AI borrowers are willing to take on high single-digit interest rates, putting upward pressure on U.S. Treasury yields, with 10-year yields rebounding to 5.31% and 30-year yields hovering near 5.70%.

T. Rowe Price fixed income portfolio manager Steven Kohlenstein stated plainly: “Risk is becoming increasingly concentrated among a small group of companies, all pointing to the same AI investment cycle. Even if these risks are spread across different issuers, sectors, and financing structures, correlation risk may not be fully reflected in current valuations.”

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

The sheer size and pace of this financing wave has caught the market off guard.

According to The Wall Street Journal, Broadcom has been arranging over $50 billion in financing for OpenAI’s custom AI chip project in recent weeks, with Apollo and Blackstone among those approached. Meanwhile, Broadcom last week began syndicated distribution for a $42 billion Class A senior secured bond for Anthropic, with Blackstone leading an additional $18 billion Class B subordinated note and putting up $9 billion itself. Bloomberg confirmed these negotiations but noted that “the formal process has not yet begun,” and the two companies may seek “around $30 billion in debt for the next stage of financing.”

As for Oracle, The Wall Street Journal reports the company is in talks with Apollo and Goldman Sachs to finance large-scale chip procurement via off-balance sheet vehicles—potentially through an independent company funded by external investors to buy chips and then lease them to Oracle. This arrangement aims, it’s reported, to help Oracle “avoid taking on more debt itself and better control debt costs.” A 1GW data center’s Nvidia chip costs about $50-60 billion, and Oracle hopes to close the deal within this year.

SpaceX is seeking about $10 billion in bank loans and $30 billion in investment-grade bonds to buy Nvidia chips, with Apollo leading and Pimco also in discussions. Notably, SpaceX completed an IPO at an $86 billion valuation in June, issued $25 billion in bonds two weeks later, and if it refinances another $40 billion now, its cumulative debt financing in four months will reach $65 billion—76% of its IPO proceeds.

Combined, these three deals and the Broadcom-Anthropic deal mean the AI ecosystem faces over $150 billion in chip debt queued for financing in roughly a week. The Oracle deal amount remains undisclosed.

Bond Market “Maxed Out”: Public Market Near Saturation, Private Credit Takes Over

The public bond market is nearing its carrying capacity—this is the fundamental reason for the shift to private credit and SPVs in the latest wave of financing.

According to Bloomberg data, this year’s investment-grade and high-yield bond issuance for hyperscalers, data centers, and AI infrastructure projects has reached at least $360 billion, representing 5.8% of all global bond sales—triple last year’s 1.9% share. Goldman Sachs credit strategist Adam Crook puts the global total for 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 in bonds for AI construction, pushing the public debt market to its limits. That’s why the latest round of financing bypasses the bond underwriters and instead relies on Apollo, Blackstone, and other private credit institutions using SPV structures.

The buildup of off-balance sheet debt is now outpacing on-balance sheet debt. The key feature of chip SPVs is that their collateral comprises graphics processors, which depreciate much faster than buildings, and part of the structure may be short-term bank loans against 15- to 19-year leases—effectively betting that companies like Oracle will refinance at today’s spreads between 2028-2032.

Apollo has participated in all three deals this week and was also involved in Broadcom’s June financing platform, xAI’s Colossus funding, and Nvidia’s $500 billion “AI infrastructure financing platform” launched in August.

CDS Hits Records, Credit Risks Are Repriced

The credit derivatives market is reacting more directly than rating agencies.

According to Bloomberg, Oracle’s 5-year CDS jumped about 10.5 basis points on Thursday to a record 261 basis points, with an implied five-year default probability above 20%. SpaceX’s five-year CDS surged from around 181 to 197 basis points—a record high—up 30% from mid-September and almost double its ~110 basis points at IPO in June. Rating agencies still award a BBB investment grade, but the CDS market’s pricing is vastly different. SpaceX’s 2056 bond is trading around 85 cents on the dollar.

Oracle’s credit situation is particularly noteworthy. Two weeks ago, Oracle’s 2056 bond fell to record lows with yields exceeding 8% after “Project Jupiter” force majeure events—wider than the average single-B junk bond. Its 1.3 GW data center campus in Wisconsin subsequently faced issues. Of about $80 billion in project debt supporting Oracle’s leased data centers, several Jupiter loans have fallen to 89 to 91 cents on the dollar.

Broadcom’s five-year CDS widened three basis points on Thursday to 136 basis points, also a new record.

Mark Clegg, senior fixed income trader at Allspring Global Investments, commented:

“Every new financing announcement feels like another bidder fighting for investors’ balance sheets, creating levels of spread volatility that were unimaginable a year ago. Some days it feels like the market is holding emergency meetings every few hours to reprice the scale of AI buildouts.”

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

The AI financing wave’s spillover effects have extended from the tech credit market to the broader capital markets.

Reuters columnist Wayne Cole noted, “Sovereign borrowers are no longer the market’s heavyweights; AI giants are encroaching on their turf.” The corporate bond competition has pushed 10-year U.S. Treasury yields back to 5.31% and 30-year yields near 5.70% during the Asian session.

Goldman’s Privorotsky explains the logic: “If you believe scarce compute can generate 20%-30% compounded IRR, you’ll gladly borrow at high single-digit interest rates to build it. But this creates immense stress for 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 have remained stubbornly high.”

The cracks in the junk bond market are even more visible. According to Goldman’s credit sales strategy team, USD CCC spreads closed at 998 basis points Wednesday, up 219 in three months and 123 in a single month—at the 99th percentile for the past year, just 2 basis points away from 1000. Meanwhile, investment-grade index spreads have held steady at 80 basis points.

JPMorgan TMT chief expert Brian Heavey also noted this morning that SpaceX bond funding “continues to pressure government bonds.” The Russell Index has underperformed the Nasdaq in 17 of the past 20 trading days—a parallel story in equity markets: long AI, short anyone who needs to borrow.

Two Paths, One Uncertainty

Goldman’s Privorotsky boils the current situation down to a binary fork:

First, AI generates enough organic cash flow to eventually self-finance, making next quarter’s results for major cloud providers critical; second, capital is rationed elsewhere, and weak points in the economy start to break.

He added, “We may already be seeing the early stages of this process in CCC spreads.”

Wavelength Capital Management CIO Andrew Dassori noted that companies have massive and growing compute financing needs, but with increasing competition and the threat of tighter regulation, revenue growth faces slowdown risk: “The market is adapting to these conditions, as you can see from the trend in spreads and volatility.”

Currently, Oracle is seen by the market as the weakest link in the entire AI credit chain—its own balance sheet can no longer support cheap financing, so it must “rent” Apollo’s. OpenAI and Anthropic effectively have no real balance sheets, and SpaceX has turned to capital markets three times in four months.

A $50 billion loan arranged for the “Chili Pepper” chip project may best encapsulate the frenzy of this AI funding wave.