US corporate AI debt surge tests investor limits as fatigue emerges

The wave of debt issuance funding the artificial-intelligence buildout is testing the limits of investor demand, with some large bond buyers warning that the market is showing signs of indigestion.

While fund managers remain comfortable with the credit ​quality of companies such as Amazon and Alphabet, Google’s parent company, they are increasingly demanding higher yields to accommodate the flood of ​issuance. This has raised concerns that a tipping point could emerge if AI spending continues to escalate.

“You’ve started to see the indigestion show up in tech spreads in particular,” said Neil Sutherland, head of U.S. fixed income at Schroders.