US Tech Giants’ AI Bond Spree Intensifies Competition for European Capital

With more than $1 trillion (€900 billion) flowing into artificial intelligence infrastructure, US technology giants are competing directly with European governments and companies for the same pool of investment capital.

Four of the five largest hyperscalers—Amazon, Alphabet (Google’s parent company), Meta, and Oracle—have issued approximately $250 billion in dollar-denominated bonds since the beginning of 2025, according to a review of US regulatory filings by AI Industry Reviews, an independent platform that evaluates AI tools. They have also sold a further €37 billion ($41 billion) of bonds in euros.

Microsoft, the last of the Big Five to refrain from the trend, recently joined the AI borrowing wave with a $25 billion bond sale, entirely in dollars.

Goldman Sachs projects that total new AI hyperscaler bond sales will reach $420 billion next year. Dutch bank ING estimates that about €60 billion will be issued in euros.

Battle for investor capital heats up

That is unwelcome news for European companies and countries such as France, Germany, and Italy, whose sovereign bond yields have risen sharply in recent months and are already straining public finances.

With public debt at 119% of gross domestic product (GDP) and a deficit still running above 5%, France is already paying a sizable risk premium on its debt. Over the past six months, yields on French 10-year bonds have climbed from roughly 3.7% to nearly 5%.

The French government’s interest bill is set to rise from €79 billion currently to €91 billion next year and over €100 billion by 2028.

Based on these figures alone, France’s Finance Ministry needs to find tens of billions of euros in additional spending cuts, tax hikes, or further borrowing by the end of the decade.

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In August, economists at the European Central Bank said the euro bond market was adapting well to the presence of AI giants but warned they “could make it harder for other companies and other economic sectors to access finance.”

Writing in a blog post, they also questioned whether the bloc’s financial 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.

‘Bond abundance’ helps drive up yields

Viktor Hjort, global head of credit strategy at French bank BNP Paribas, described the phenomenon as “bond abundance.”

Hjort told DW that the presence of hyperscalers 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. These are investment funds that mostly buy bonds, which pay regular interest.

Bond yields jumped again last month, driven by rebounding energy prices linked to the Iran war and France’s political crisis, which Hjort said further revealed the growing competition for capital as government and company borrowing costs rose together.

Normally, nervous investors move into government bonds during uncertain times, which pushes their borrowing costs down.

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European companies could also feel more pain

Goldman Sachs warned last week that rising interest costs were starting to hurt earnings at European companies. Among firms in the Stoxx 600—an index of 600 large, mid-sized, and small companies across Europe—Goldman found that interest costs as a share of sales have risen by nearly half since 2022.

The bank’s analysts said this had cut earnings by more than 5% over the same period.

Factoring in competition from AI bonds, European firms could now face pressure to cut their investments in new plants, equipment, and research, as well as shareholder payouts, to prioritize loan repayments.

Regional governments paying the price for AI

The pressure does not stop at national governments. Europe’s cities and regions, whose borrowing helps fund schools, transport, and infrastructure, may also feel the effects of the AI boom.

A study for the Organization for Economic Co-operation and Development (OECD), published in January, compared local bond markets in Belgium, Germany, Spain, Sweden, and Canada. 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,” the study’s co-author, Christos Makridis of Arizona State University’s W. P. Carey School of Business, told DW.

While AI bonds are far from the sole cause of Europe’s widening fiscal strains, US Big Tech’s huge appetite for capital could add further pressure next year due to the 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.

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