Tech Giants' AI Spending Spree Creates Rivalry for U.S. Government Bonds

2026-01-11 economy

New York, Sunday, 11 January 2026.
As U.S. debt exceeds $38 trillion, a predicted $2.25 trillion wave of corporate bonds funding AI infrastructure is flooding the market, stealing buyers from Treasuries and risking higher yields.

A Clash of Capital: Treasuries vs. Tech

The United States bond market has entered a precarious new phase of competition. With the national debt now surpassing the staggering $38 trillion mark [1][2], the Treasury Department finds itself vying for investor capital against a formidable private sector rival: the technology industry. On January 3, 2026, Apollo Chief Economist Torsten Slok highlighted that Wall Street estimates for investment-grade corporate debt issuance will reach $2.25 trillion this year [1][2]. This massive influx of high-quality corporate paper is creating a supply glut that threatens to crowd out demand for government bonds, raising critical questions about who will absorb the nation’s sovereign debt without demanding significantly higher yields [1].

The Price of Artificial Intelligence

The primary driver of this corporate borrowing spree is the voracious capital requirement of “hyperscalers” funding the artificial intelligence boom [2]. Technology giants are issuing bonds to finance the construction of data centers and energy infrastructure necessary to power next-generation computing. For example, Meta has outlined a strategy involving capital expenditures exceeding $70 billion, supported by massive corporate bond issuance, to secure its position in the AI landscape [5]. This spending includes a transition toward nuclear power to support its “Prometheus” supercluster, which is expected to come online in 2026 [5]. Similarly, Nscale, an AI hyperscaler backed by Nvidia, is reportedly discussing a $2 billion funding round to support its own infrastructure expansion [4].

The Threat of Fiscal Dominance

The struggle to find buyers for U.S. debt is exacerbating concerns regarding “fiscal dominance”—a scenario where the central bank is forced to prioritize government financing over price stability. On January 5, 2026, former Treasury Secretary Janet Yellen warned that the “preconditions for fiscal dominance are clearly strengthening” [1][2]. This structural fragility is compounded by a dramatic shift in the composition of Treasury holders. In the early 2010s, foreign governments held over 40% of Treasury bonds; today, that figure has plummeted to less than 15% of the overall market [1]. The market is now increasingly reliant on profit-driven private investors rather than price-insensitive sovereign entities [1][2].

Geopolitical Headwinds and Market Fragility

The reliance on private and foreign investors has made the Treasury market more sensitive to political volatility. Following the White House’s January 6, 2026, statement regarding options to acquire Greenland, Danish pension funds have reassessed their U.S. holdings [7]. AkademikerPension, which manages approximately $24.5 billion (157 billion kroner) in assets, indicated it would have to respond if annexation occurred [7]. Furthermore, PFA, a Danish pension fund, has already sold its U.S. government debt, citing risks related to the dollar’s reserve status and central bank independence, while notably retaining its investments in American corporate bonds [7]. This divergence underscores the growing preference for U.S. corporate credit over U.S. sovereign debt, a trend that could leave the financial system more fragile in times of stress [2].

Sources

National Debt Corporate Bonds