US Corporate Bond Sales to Exceed $190 Billion in May Amid AI Frenzy

US investment-grade corporate bond sales are forecast to surpass $190 billion in May, a post-pandemic record, as companies rush to lock in borrowing costs amid a surge in funding for artificial intelligence infrastructure.

The flood of new debt tests a market that has been eagerly supplied by foreign buyers. "Foreign investors have rotated toward TMT and away from financials, and added more in the 15y+ maturity bucket, in line with recent trends in the primary market," Citigroup said in a recent note to clients, highlighting a 15-month streak of strong overseas demand.

The shift is stark: foreign investors increased their purchase share of technology, media, and telecom (TMT) bonds to 26.1 percent in 2026 from 17.1 percent a year prior, according to Citigroup data. Over the same period, their allocation to financial debt fell to 39 percent from 53.8 percent. This rotation has been accompanied by a voracious appetite for longer-dated debt, with bonds maturing in over 15 years accounting for 44.1 percent of purchases, nearly double the 23.7 percent share from 2025.

This wave of issuance is fueled by the insatiable capital demands of the AI boom, which is powering both equity market returns and corporate debt calendars. The need to fund costly data centers and AI-related infrastructure is creating a supply-demand tension that could define credit markets for the rest of the year, with some analysts warning that valuations are stretched.

The AI Funding Arms Race

The primary driver for the record issuance is the capital expenditure arms race in artificial intelligence. "Hyperscalers," the mega-capitalization tech firms, are projected to spend over $500 billion on capex in 2026, according to Reams Asset Management. This has led Bank of America to anticipate a slowdown in supply during the second half of the year after such a front-loaded first half.

Total investment-grade issuance is now projected to reach $1.8 trillion for the full year, a figure that would mark the largest year since the record-breaking post-Covid period of 2021 and 2022. This demand for funding is so robust that it's improving the credit profiles of some issuers, with Citigroup noting positive rating actions for firms like American Tower and Analog Devices due to their role in the AI infrastructure buildout.

A Structural Shift in Global Demand

Underpinning the market's ability to absorb this supply is a structural shift in global capital flows. With US companies accounting for the majority of the world's $11.6 trillion top-rated corporate bond market, "global investors seeking long-duration credit exposure have no viable alternatives at scale," Citigroup analysts noted. This reinforces the structural appeal of US assets.

The strongest inflows have come from Canada, Japan, Norway, Taiwan, Kuwait, and Hong Kong. The demand from foreign pension funds and insurance investors, who need long-term, high-quality assets to match their liabilities, creates a consistent bid that has so far absorbed the record supply.

Valuations Under Pressure?

Despite the strong demand, some asset managers are growing cautious. Reams Asset Management notes that corporate credit spreads have tightened to levels not seen since 1998, making valuations "no longer attractive by any metric." While corporate balance sheets remain strong, the firm points to late-cycle behavior and the sheer volume of new supply as reasons for a defensive posture.

The base case for Reams is for modestly wider spreads in 2026, partially offset by the positive carry from corporate coupons. The key risk is whether the market can continue to digest the wall of new debt, particularly from the TMT sector, without demanding higher premiums.

This article is for informational purposes only and does not constitute investment advice.