PIMCO Flags AI Borrowers as Nearly Half of Long-Dated US Bond Sales
AI-related companies now account for almost half of this year's long-dated US investment-grade corporate bond issuance, PIMCO said in a November 10 note. The firm's strategist urged investors to look at mortgage-backed securities to diversify away from the AI build-out.
Borrowers tied to artificial intelligence now account for almost half of this year's gross issuance of long-dated US investment-grade corporate bonds, according to a note PIMCO published on November 10. The asset manager says the AI build-out is reshaping the debt market and that investors should look beyond Big Tech for diversification.
The figure covers non-financial US investment-grade debt with maturities beyond 15 years, measured year to date.
"For most of the past 3 years, the AI investment boom has been an equity story, but it is increasingly becoming a bond-market story," said Kevin Thozet, a member of Carmignac's investment committee. "The numbers are becoming too large for bonds investors to ignore."
The size of the borrowing
Goldman Sachs projects AI hyperscaler debt issuance at around $250 billion in dollar-denominated bonds this year. Hyperscalers are the largest cloud and AI infrastructure companies.
Estimates for the wider AI ecosystem range between $300 billion and $570 billion. That wider group includes chipmakers, utilities and data center developers.
Concerns are also growing about a slowdown in the AI build-out after the Democrats' sweeping victory in the US midterm elections. That could complicate life for long-duration investors seeking diversification, particularly because longer-dated US Treasurys, the traditional hedge, have been rattled by volatility for much of 2026.
Where PIMCO sees alternatives
Lotfi Karoui, a managing director and multi-asset strategist at PIMCO, said financials offer a large pool of investment-grade exposure with much less direct sensitivity to AI spending. In high-yield markets, he said, "old economy" sectors such as energy can play a similar role.
He cautioned that both are pricey. "Their spreads above like-maturity Treasuries generally appear tight relative to their risk-adjusted return potential," Karoui said.
Instead, PIMCO points to agency mortgage-backed securities. These are bonds backed by US home loans guaranteed by government-sponsored enterprises such as Freddie Mac and Fannie Mae. Karoui said they have held up better this year against higher rates and rate volatility than in 2023.
The note cited PIMCO and Bloomberg data showing agency MBS paying 33 basis points more than US investment-grade corporate spreads as of November 5, without the same exposure to corporate borrowers.
PIMCO also highlighted senior, AAA-rated portions of bonds backed by mortgages that fall outside the Qualified Mortgage category. Karoui said the potential benefits in those tranches "likely outweigh risks." The main danger, he said, is that repayments take longer than expected, not that borrowers fail to pay.
