Remember when your biggest financial worry was whether to splurge on avocado toast? Well, Big Tech just said “hold my kombucha” and decided to borrow so much money for AI that they might accidentally mess with everyone’s interest rates.
Here’s the deal: Torsten Sløk, the chief economist at Apollo Global Management (fancy title, I know), just dropped a warning that’s basically the financial equivalent of “Houston, we have a problem.” All those AI companies building data centers like they’re playing SimCity on steroids? They’re funding it with debt. A LOT of debt.
We’re talking about companies like Google, Amazon, Meta, Microsoft, and Oracle collectively issuing $100 billion in bonds last year alone. That’s double what they borrowed the year before. To put that in perspective, that’s enough money to buy Twitter… twice. (Too soon?)
But here’s where it gets spicy: Sløk thinks this AI-fueled borrowing bonanza could actually push interest rates higher. And not in a “oh, rates went up 0.1%” way, but in a “this could actually matter to your mortgage” way.
The logic is pretty straightforward, even if the implications aren’t. When companies flood the market with new bonds, they’re essentially competing for the same pool of investors who might otherwise buy Treasury bonds. It’s like musical chairs, but with trillions of dollars and way less fun music.
“The significant increase in hyperscaler issuance raises questions about who will be the marginal buyer,” Sløk wrote, using economist-speak for “somebody’s gotta buy all this debt, but who?”
Wall Street banks are predicting anywhere from $1.6 trillion to $2.25 trillion in investment-grade bond sales this year. That’s not a typo – we’re talking about enough money to make Scrooge McDuck’s money bin look like a piggy bank.
The kicker? This isn’t just some abstract economic theory. If corporate borrowing pulls investors away from Treasury markets, it could push up the baseline interest rates that affect everything from your credit card to your car loan. It’s the financial equivalent of a butterfly effect, except the butterfly is a massive data center and the hurricane is your monthly payments.
Sløk isn’t the only one raising eyebrows. Mark Zandi from Moody’s Analytics recently pointed out that tech borrowing has already surpassed dot-com bubble levels. You know, that bubble that didn’t end super well for anyone involved.
So what’s the takeaway here? Well, while AI companies are busy building the future (and borrowing against it), the rest of us might want to keep an eye on interest rates. Because when tech giants play with debt like it’s Monopoly money, sometimes the rest of us end up paying real-world prices.
The AI revolution is happening, no doubt about it. But as with most revolutions, somebody’s got to pay for it. The question is whether that somebody will be the companies building it, or all of us dealing with higher borrowing costs down the line.