Technology IPOs are expected to heat up, but has Wall Street's main battleground shifted to the bond market?

Although the IPO prospects of star companies like SpaceX and OpenAI have garnered much attention, the current focus of the U.S. tech capital markets has shifted to debt financing. To support the rapid expansion of AI infrastructure, the global issuance of tech and AI-related bonds is soaring, expected to approach the $1 trillion mark this year from $710 billion in 2025.

The four tech giants—Alphabet, Amazon, Meta, and Microsoft—are projected to spend or finance lease a combined total of $700 billion this year to meet epic demand for computing resources. To fill funding gaps, leading companies are intensively entering the bond markets: Alphabet completed over $30 billion in bond issuance this week, Oracle announced an internal financing target of $45-50 billion for the year in early February, and quickly executed a $25 billion bond sale.

Morgan Stanley estimates that there is approximately $1.5 trillion in financing gaps in the AI infrastructure sector, most of which will be filled by the debt markets. Analysts warn that as tech companies continue to increase bond issuance, the weight of the tech sector in investment-grade corporate bond indices could rise from the current 9% to over a dozen percentage points, increasing concentration risk at the index level; meanwhile, massive supply could also push up financing costs for issuers in other industries, creating spillover effects across markets.

Massive Financing Drives Bond Market Expansion

UBS estimates that by 2025, global debt issuance related to tech and AI will more than double year-over-year to $710 billion, with further growth expected to nearly reach $990 billion in 2026. Bond data provider BondCliQ CEO Chris White notes that the corporate bond market is experiencing an “unprecedented surge” in supply, with scale expansion unlike anything before.

Oracle and Alphabet are leading this wave of issuance, with more tech giants signaling their financing intentions. Last week, Amazon filed a hybrid shelf registration, hinting at a possible combination of equity and debt financing. Meta CFO Susan Li stated during earnings calls that the company will “prudently evaluate external financing costs and benefits to supplement cash flow, and may ultimately maintain a positive net debt position.” Tesla CFO Vaibhav Taneja also commented after Q4 earnings that, as infrastructure investments proceed, the company is “not ruling out seeking external funding through debt or other means.”

U.S. IPO Market Remains Quiet

Contrasting sharply with the boom in debt financing, the U.S. tech IPO market remains subdued. So far this year, no well-known tech companies have filed for an IPO, with market expectations mainly centered on Elon Musk’s capital maneuvers.

Last week, Musk merged SpaceX with AI startup xAI, creating a new entity valued at $1.25 trillion. Although there are reports that SpaceX plans to go public independently by mid-2026, investors and Gerber Kawasaki CEO Ross Gerber believe Musk is more likely to integrate it with Tesla rather than take it public separately.

AI stars with billion-dollar valuations like OpenAI and Anthropic have yet to set IPO timelines. Goldman Sachs analysts project a total of 120 IPOs nationwide this year, raising $160 billion, a significant rebound from 61 deals last year, but Class V Group partner Lise Bailer notes there are no clear signals of a startup IPO surge in the tech sector.

Bailer states that heightened market volatility, vulnerability in software and AI-related valuations, combined with geopolitical risks and soft employment data, have led venture-backed startups to adopt a wait-and-see approach. She comments:

“While the current market environment is better than the past three years, it’s still far from triggering a wave of IPOs.”

According to Professor Jay Ritter of the University of Florida, last year the U.S. completed 31 tech IPOs, surpassing the total of the previous three years but still well below the peak of 121 in 2021.

Concentration Risks and Cost Transmission Concerns

As AI infrastructure financing accelerates, the weight of tech companies in the investment-grade corporate bond index is approaching double digits. John Lloyd, head of global multi-sector credit at Janus Henderson Investors, says that currently, the tech sector accounts for about 9% of the index, and is expected to rise to over a dozen percentage points, increasingly resembling the “one-third of the market cap” structure of the “trillion-dollar tech club” in the S&P 500.

Bailard CIO Dave Harrison Smith points out that this concentration presents both opportunities and risks. While related companies have ample cash flow and flexible capital allocation, “the scale of required investments is staggering.” Chris White warns that the heavy bond issuance by tech giants will squeeze demand for other issuers, forcing investors to seek higher yields and thus raising overall market financing costs.

Despite recent bond sales by Alphabet reportedly being five times oversubscribed, with 2029 and 2031 maturities priced at yields of 3.7% and 4.1%, respectively—only slightly above three-year U.S. Treasuries—indicating investors have almost not demanded a risk premium. White states, “Supply will continue to flow, and demand will eventually be pressured.” He particularly warns that companies needing to refinance in the coming years may face significantly higher debt costs, especially in sectors like automotive manufacturing and banking.

Lloyd adds that current investment-grade credit spreads are at historic lows, making bond allocation more challenging. After issuing $20 billion in USD bonds, Alphabet is now turning to Europe, aiming to raise about $11 billion. Media reports cite a credit analyst suggesting that if Alphabet succeeds offshore, it could trigger other large cloud service providers to follow suit, indicating this tech debt expansion has gone beyond Wall Street’s traditional demand scope.

Risk Warnings and Disclaimers

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