US technology giants racing to build out artificial intelligence are increasingly turning to bond markets, putting them in direct competition with European governments and companies for the same pool of investor capital.
With more than $1 trillion (€900 billion) pouring into the AI build-out, four of the Big Five hyperscalers, Amazon, Google parent Alphabet, Meta and Oracle, have issued around $250 billion in dollar-denominated bonds since the beginning of 2025, according to a tally of filings with US financial regulators by AI Industry Reviews, an independent platform that evaluates AI tools. The group has also sold €37 billion ($41 billion) of bonds in euros.
Microsoft, the last of the Big Five to hold back, recently joined the borrowing spree with a $25 billion bond sale, all in dollars. Goldman Sachs projects that total new AI hyperscaler bond sales will reach $420 billion next year, with about €60 billion of that issued in euros, according to Dutch bank ING.
That is unwelcome news for European borrowers such as France, Germany and Italy, whose sovereign bond yields have risen sharply in recent months. France, with public debt at 119% of gross domestic product and a deficit still running above 5%, already pays a sizable risk premium. Yields on French 10-year bonds have climbed from roughly 3.7% to nearly 5% over the past six months, and the government's interest bill is set to rise from €79 billion currently to €91 billion next year and more than €100 billion by 2028. On those figures alone, the Finance Ministry must find tens of billions of euros in additional cuts, tax hikes or further borrowing by the end of the decade.
Economists at the European Central Bank said in August that the euro bond market was adapting well to the presence of AI giants, but cautioned they "could make it harder for other companies and other economic sectors to access finance." Writing in a blog post, they questioned whether the bloc's markets can "smoothly handle such large and concentrated debt inflows" and warned of a "potential spillover to the sovereign and supranational segment of the bond market." That means governments and international lenders such as the European Union and the European Investment Bank could also end up paying more to borrow.
Viktor Hjort, global head of credit strategy at French bank BNP Paribas, described the phenomenon as "bond abundance." He told DW that the hyperscalers' presence in the euro bond market is "already high enough to create competition" within the corporate sector and "between corporates and governments for available fixed income funds." Yields jumped again last month, driven by rebounding energy prices linked to the Iran war and France's political crisis, a move Hjort said further revealed the growing competition for capital as government and company borrowing costs rose together. Normally, nervous investors shift into government bonds during uncertain times, pushing those borrowing costs down.
European companies are feeling the strain as well. Goldman Sachs warned last week that rising interest costs are starting to hurt earnings, finding that among firms in the Stoxx 600 index, interest costs as a share of sales have risen by nearly half since 2022, cutting earnings by more than 5% over the same period. With AI bonds adding to the competition, European firms could now face pressure to scale back investment in new plants, equipment and research, as well as shareholder payouts, to prioritize loan repayments.
The pressure extends below the national level. A study for the Organization for Economic Co-operation and Development, published in January, compared local bond markets in Belgium, Germany, Spain, Sweden and Canada and found that where AI was spreading fastest, measured by the share of AI-related job vacancies, borrowing costs for cities and regions tended to rise. "Whereas in the United States, my research has found that AI investments are linked to a lower cost of borrowing for municipalities, the opposite appears to hold in several European countries," co-author Christos Makridis of Arizona State University's W. P. Carey School of Business told DW.
AI bonds are far from the sole cause of Europe's widening fiscal strains, but US Big Tech's huge appetite for capital could add further pressure next year, with additional billions in new bonds planned. The irony is that European taxpayers could end up paying more on their own governments' debt, partly to help finance an AI boom across the Atlantic.
