OCT · ISSUE 41 · October 7, 2026
TECH · STRUCTURALAI's debt bill
Data-center spending no longer comes only from cash. The share funded with bonds keeps growing.
COST OF MONEY
5.3%
10Y, the bar to clear
IN 2021
~1.5%
what it used to cost
BOND SUPPLY
RECORD
corporate issuance
THE IDEA
5.3%
↑ cost of new debt, versus almost nothing a few years ago
Building AI costs enormous sums. While it was paid for with the cash megacaps generate, it was sustainable. But the debt-funded share is growing, and that debt now pays interest at a two-decade high.
DATA
ZOOM IN5.3%
5.3%
▲ from ~1.5% in 2021
Every extra point of interest on a mountain of debt is an annual bill paid straight out of future profit.
That is what it costs to borrow long-term today, benchmarked to the 10-year. In 2021 it was near 1.5%: the cost of money has more than tripled.
- LONG-TERM
- — Debt that matures in many years, used for big projects.
- BENCHMARKED
- — Priced off another rate as its base, here the 10Y.
QUOTE
THE READReported profit can hide leverage
“When growth is paid for with cheap debt, it is an engine. When money gets dear, that same debt becomes an anchor.”
A company can beat on earnings and still pile up debt to fund its growth. The second part never makes the headline.
- LEVERAGE
- — Using debt to fund investment and amplify the result.
- ANCHOR
- — A drag, here the cost of interest weighing on profit.
TREND
AI SPENDINGThe curve that explains half the market
Spending is exploding. While cash pays for it, fine; the risk is born when debt takes over.
Illustrative path of AI infrastructure spending. The shape is the story: it climbs vertically, and increasingly on debt.
- INFRASTRUCTURE
- — The data centers, chips and power that AI needs.
- VERTICAL
- — A very fast, steep rise in a short span of time.
TWO WAYS TO GROW
CASH VS DEBTSame spending, two opposite risks
WITH OWN CASH
The comfortable model
- Paid for with the free cash the business itself generates.
- Adds no interest and no maturity schedule.
- If the project fails it hurts, but it drags no debt behind it.
WITH DEBT
The model the market watches
- Adds an annual interest bill at today's 5%.
- It must be refinanced at maturity, maybe at worse rates.
- It turns a bet on the future into a fixed obligation in the present.
Not all AI spending carries the same risk. It depends on whether cash you already have pays for it, or money you borrow.
- FREE CASH
- — The money left over after paying every cost of the business.
- MATURITY
- — The date on which issued debt must be repaid.
EXAMPLE
HOW IT IS FUNDEDWhere the money for AI comes from
Indicative proportions. The point isn't the exact number, it's that the debt slice is no longer small.
Illustrative split of how an investment wave like today's is funded. The debt slice is the one that grows and the one the market watches.
- SHARE ISSUANCE
- — Issuing new stock to raise money, diluting existing owners.
- DILUTE
- — Splitting the company across more shares, lowering each one's weight.
WATCHLIST
6 KEY ETFsSix ETFs where AI's debt shows up
| SMH | 305.00 | ▲ +0.8% | Semis. The demand side of the boom: who sells the shovels in this gold rush. |
| XLK | 268.00 | ▲ +0.6% | Big tech. The megacaps leading the AI spend. |
| LQD | 109.00 | ▼ -0.3% | Quality corporate bonds. Where the newly issued debt parks. |
| HYG | 78.50 | ▼ -0.5% | High-risk corporate bonds. The first place credit stress shows up. |
| VCIT | 80.20 | ▼ -0.2% | Mid-term corporates. A gauge of appetite to lend to companies. |
| TLT | 84.90 | ▼ -1.1% | US 20+ year Treasuries. The interest bar that new debt has to clear. |
Indicative levels from the recent close. What matters is the story each one tells about the spending and how it is funded.
- ETF
- — A listed basket that tracks an index or asset type.
- QUALITY (IG)
- — Debt of solid companies, lower default risk.
- HIGH RISK (HY)
- — Debt of frailer companies, paying more for more risk.
WRAP
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- CAPEX
- — Spending on assets; here, AI infrastructure.
- CREDIT
- — The debt market: who lends, to whom, at what rate.