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The $315b debt binge that’s driving up the cost of borrowing
AI giants' $315 billion debt binge is driving up borrowing costs for governments and companies
Key points
- Bond issuance from the five largest hyperscalers reached US$222 billion ($315 billion) this year, according to the Bank for International
- Tech giants such as Google and Microsoft have turned to bonds as AI infrastructure spending has expanded.
- Alphabet issued its first Aussie dollar bond in August, including 10- and 20-year bonds often used by governments.
Why it matters. Competition from AI borrowing is pushing up bond yields, which the article says raises funding costs for governments and could feed into higher mortgage rates.
The Bank for International Settlements said bond issuance by the five largest AI hyperscalers reached US$222 billion ($315 billion) this year, outpacing past credit booms. Tech giants such as Google and Microsoft have borrowed to fund data centres, competing with governments and other big companies for funds. Commonwealth Bank's Adam Donaldson said the AI borrowing surge has helped drive up government bond yields.
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The $315b debt binge that’s driving up the cost of borrowing
The AI craze is not only threatening to wipe out jobs and inflate a sharemarket bubble. It’s also costing governments more when they borrow. November 2, 2026 — 5:00am If the Reserve Bank raises interest rates for millions of households with mortgages this week, as expected, it will no doubt say it’s responding to stubbornly high domestic inflation. That’s true enough, but it’s far from the only reason why borrowing money is getting more expensive. There’s another, global factor feeding into higher borrowing costs for huge borrowers such as governments and corporations, and that’s the AI craze. As tech giants borrow hundreds of billions to build data centres, it sparks a fight for credit with other big borrowers. iStock Most gloomy AI stories centre on fears of a sharemarket bubble, the prospect of mass job carnage or, if we’re really feeling grim, the risk of human extinction. Lately, however, more attention is shifting to the monumental debt pile that is paying for the AI spending spree. The borrowing binge is not only making investors nervous about whether all the AI investments will deliver the hyped and hoped-for profits. It has also intensified a race between big corporations and governments as they compete to borrow vast sums of money, and it’s one reason why some experts think higher interest rates are here to stay. In other words, it’s a story that matters for all of us.