How AI investment is transforming credit supply

The AI capital expenditure (capex) cycle is reshaping credit markets and has produced a deluge of issuance. Gross investment-grade supply is running more than 20% ahead of its five-year average year-to-date; AI capex names have accounted for roughly 20% of total US investment-grade issuance over the past twelve months.[1]

Issuance from high-quality borrowers financing data centres, semiconductors and digital infrastructure has accelerated materially, increasing both supply and index concentration.

As a result, the corporate bond market is being reshaped more rapidly than many investors appreciate. Today, enablers of AI remain a substantially smaller footprint in credit indices than in equity benchmarks.

This matters for a reason too rarely articulated: equity investors have tolerated concentration in the hyperscalers and semiconductor names because they have participated in the upside that justifies it; bondholders do not. Their compensation is capped at par, and there is little reason to assume they will remain as accommodating as their equity counterparts.

However, the accelerating AI arms race and current valuations create a more demanding environment for credit investors. The tension between yield-focused buyers and those requiring adequate compensation for risk is likely to intensify as supply grows and spreads adjust.

In this context, we think a more selective and flexible approach to fixed income becomes essential, with an emphasis on diversification beyond a single dominant theme. 

[1] Source: L&G Asset Management – America, Bloomberg as of April 27th, 2026