Nvidia is raising $20 billion through a bond sale to finance operations and expansion.
The AI industry is accelerating its debt-driven expansion in a pivotal shift in the sector's financial strategy. Nvidia announced plans to raise $20 billion through its first corporate bond sale since 2021, with the seven-tranche offering spanning maturities of two to 30 years, with the 10-year portion expected to yield 0.75 percentage points above U.S. Treasuries. This development underscores a sector racing to fund an AI infrastructure boom that has become increasingly reliant on debt. The industry's reliance on debt has surged 357% year-to-date, with $236 billion in AI-linked debt issued in 2026 alone. By year-end, this figure is projected to surpass $570 billion, a staggering leap from the $50 billion in annual AI debt seen in 2020.
The AI sector's debt explosion extends far beyond conventional on-balance-sheet borrowing. A report titled "The $1.8 Trillion Off-Balance Sheet Time Bomb at the Heart of the AI Supercycle" highlights the industry's reliance on special purpose vehicles (SPVs), long-term purchase commitments and lease arrangements, including $1 trillion in long-term purchase commitments and $800 billion in lease obligations, to mask true funding costs. Goldman Sachs estimates the AI infrastructure buildout could require $1.4 trillion in capital expenditures by 2027, with costs per gigawatt of data center construction doubling to $100 billion due to denser silicon like Nvidia's Rubin-class racks. These off-balance-sheet mechanisms create concentrated counterparty exposure that could propagate financial stress across the ecosystem. As one analyst notes, "The window to fund this expansion is closing rapidly," as hyperscalers race to secure infrastructure before interest rates or market sentiment shift.
Financial stress indicators are mounting. Hyperscalers' gross leverage has doubled in just two quarters, rising from 0.9x in late 2025 to 1.8x in early 2026, surpassing even the energy sector's leverage ratios. Credit spreads for companies like Meta have widened to the A rating level, signaling investor caution. Morgan Stanley warns that the AI industry's $2 trillion in unfunded future obligations, backed by a handful of long-duration contracts, could destabilize if leverage unwinds or demand softens. The sector's circular financing amplifies these risks: Anthropic recently secured $35 billion in private credit from Broadcom to avoid overreliance on public debt, while Alphabet raised $85 billion in equity—a rare move for a cash-rich tech giant. Meta's $30 billion debt issuance and Amazon's aggressive borrowing further underscore the industry-wide scramble for capital.
The sustainability of this expansion has drawn scrutiny from major institutions. While Nvidia's stock has surged 51% year-to-date and the company has secured $500 billion in AI chip orders, the International Monetary Fund and Bank of England have flagged potential overvaluation, comparing AI's boom to the dot-com bubble. Bullish analysts like Cathie Wood insist the AI revolution is just beginning, citing Nvidia's $1 billion investment in 6G technology with Nokia as proof of enduring demand. Yet the industry's dependence on debt raises existential questions about how companies will fund trillions in unfunded obligations if interest rates rise or investor confidence falters. As one analyst summarizes the precarious position: "The AI sector is building the future on a house of cards and the next wind could topple it." For now, the bond market remains open, but the sector's fate ultimately hinges on who can outspend their rivals in a debt-fueled sprint toward an uncertain future.