AI Debt Indigestion Forces Wall Street to Rethink Bond Sales
Davide Barbuscia, Reshmi Basu, Tasos Vossos and Ronan Martin
Fri, August 7, 2026 at 3:30 PM GMT+5:30
5 min read
(Bloomberg) — When BlackRock Inc. sought to raise billions in debt financing for a Meta Platforms Inc. data center, there was one type of investor the asset management giant wanted to avoid: those looking for a quick profit
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To insulate the deal from the chill engulfing AI-linked debt, the transaction’s underwriters deliberately favored so-called real-money accounts like pension and insurance funds, according to people familiar with the matter. Those institutions typically buy-to-hold — unlike fast-trading investors whose rapid-fire strategies can swiftly tank a bond’s secondary market performance
It was a defensive maneuver born from a reversal in investor appetite. As tech borrowing surges, buyers have grown wary that massive AI spending won’t pay off. Nvidia Corp., SpaceX and Amazon.com Inc., each raised $25 billion only to see their debt crater below issue price the moment trading began. If bonds keep weakening soon after being sold, money managers grow hesitant to buy them
“The biggest headwind facing banks and issuers is the lack of secondary market performance,” said John Servidea, global co-head of investment grade finance at JPMorgan Chase & Co. “We continue to believe the market can absorb this issuance but its scale and speed have created indigestion.”
To combat cooling demand, underwriters are spacing out debt sales and signaling a slower issuance pace. Alphabet Inc. said on Thursday that its latest bond sale would be its last in the US market this year, and offered other concessions to boost demand. Others are seeking to anchor investor interest before a formal launch by scheduling non-deal roadshows to determine what price would convince buyers
The strategy appeared to work for BlackRock’s $12.5 billion bond sale, led by JPMorgan and Morgan Stanley. Although the transaction’s oversubscription level fell below average, the selective allocation helped the bonds outperform after pricing, with their spread over Treasuries dropping as soon as they started trading
Still, clearing the deal had required BlackRock to dangle a hefty 7.5% yield
Representatives for BlackRock, JPMorgan, Meta and Morgan Stanley declined to comment
Contrast that with SpaceX’s debt. When the company sold $25 billion of bonds in June, the notes weakened quickly, with traders suggesting it was fast-money accounts looking to flip it
