AI bond issuance falls to about $23B in September; Morgan Stanley sees Q4 rebound

Global AI-related bond issuance fell to about $23 billion in September, the second-lowest monthly total of the year, while US investment-grade AI issuance dropped to zero, according to a report dated October 3. Morgan Stanley described the slowdown as "a pause, not a retreat," and said it expects issuance to recover in the fourth quarter, though not at the explosive pace seen in the first half of the year.

The bank attributed the September cooling not to weakening fundamentals or a shortage of capital, but to three overlapping factors: a large share of issuance having been pulled forward earlier in the year, regulatory and political headwinds facing data center construction, and a sharp rise in rates that forced terms to be renegotiated at the project level.

AI financing has moved unevenly through the year. June marked the annual peak at $113 billion in a single month, and volumes declined month by month after that. High-quality hyperscalers — Google, Amazon, Meta and Microsoft — issued about $132 billion in the investment-grade market this year, roughly 25 times the year-earlier level. Counting Oracle and SpaceX as well, the six hyperscalers together issued about $254 billion across all currencies, with much of that concentrated in the first half. Through the end of September, global AI-related bond issuance for the year had reached $466 billion, more than double the $216 billion recorded in all of last year. The most recent verifiable development is Morgan Stanley's expectation for the fourth quarter.