AI-driven financing and bond issuance surge increases borrowing costs in emerging markets

The debt financing boom sparked by fundraising for AI infrastructure development is leading governments and tech giants into a capital bidding war. According to Bank of America strategists, this trend is driving up borrowing costs for developing countries, while geopolitical concerns, high oil prices, and rising policy interest rates have already put upward pressure on those nations' bond yields. Since the second half of this year, the average yield on emerging-market dollar bonds has surged by nearly 1 percentage point, reaching its highest level since April last year. Institutional data shows that just Amazon and Alphabet Inc., the parent company of Google, have issued a total of around $70 billion in debt since the second half of this year. In contrast, since July 1, the amount of international bonds issued by emerging-market sovereign borrowers has halved to $45 billion, down from $91 billion during the same period last year. Of this, issuance by investment-grade emerging market countries fell 56% to $29 billion.