US corporate bond issuance is expected to reach record levels next year, driven by the artificial intelligence investment boom.
Morgan Stanley forecasts that $2.25 trillion worth of investment-grade corporate bonds will flood the US market in 2025, Bloomberg reported Monday. This represents a roughly 25% increase from this year's corporate bond volume of $1.8 trillion.
The investment bank projects that bonds directly related to AI will reach $400 billion next year. Big tech companies with massive AI infrastructure, including Alphabet, Amazon, and Meta Platforms, are estimated to have capacity to issue $700 billion in corporate bonds without risking credit rating downgrades.
Beyond the AI investment boom, key factors driving the increase in bond issuance include refinancing of existing debt and merger and acquisition demand. According to JP Morgan, US companies need to refinance more than $1 trillion in debt next year.
Several major M&A deals are also expected. Key transactions likely to be funded through corporate bonds include the bidding war for Warner Bros. Discovery and Kraft Heinz's spinoff of its North American grocery business.
However, Bloomberg noted that it remains uncertain whether market demand will keep pace even as bond issuance increases.
