Most people treat the bond half of a portfolio as the boring half. It is supposed to be the part with no story in it. This month it has one.
The Borrowing Wave
The companies building artificial intelligence are borrowing on a scale the bond market is having trouble swallowing.
Over the past several weeks, the market strained to absorb $75 billion of new bonds from just three borrowers: Nvidia (NVDA), SpaceX and Amazon (AMZN).
Zoom out and the wave gets bigger. Six big AI companies have sold about $244 billion of bonds this year, per Dealogic. All of last year: $108 billion. In 2024: $17 billion.
The Journal summed up Wall Street’s message to the borrowers in three words: please slow down.
Not A Credit Scare
Here is the precise part, because precision matters on a page like this. Investors are not worried about being paid back.
Their worry is mechanical. Hundreds of billions more in bonds are coming, and nobody wants to be full when the next deal lands.
Travis King of Voya Investment Management said it out loud: “Everyone wants to leave some room for the next deal.”
You can see the flinch in prices. A bond’s spread — the extra interest it pays above safe Treasurys — is the market’s mood ring.
Alphabet’s (GOOGL) 10-year spread rose 0.12 point last week. Meta’s (META) climbed 0.16. The average investment-grade bond — the safest tier of company debt — moved just 0.02.
SpaceX, a first-time borrower nobody quite knows how to price, has seen its 10-year spread jump nearly half a point since June 23. Nvidia’s $25 billion June sale caught buyers off guard, and Amazon matched that size last week.
The strain is landing on these bonds specifically, not on the bond market as a whole. That detail is the difference between a story and a scare.
Your Bond Fund’s Question
So what does this have to do with your retirement account? One narrow, useful thing.
Tech bonds now make up a growing share of benchmark bond indexes — the yardsticks most bond funds are graded against. The closer a fund hugs its yardstick, the more of this paper it tends to hold.
Some managers lean away on purpose. John Lloyd of Janus Henderson has held fewer of these bonds because his team expected the companies to outspend the estimates. High-end guesses for AI spending now run north of $10 trillion over the next several years.
The stakes, per Ryan Jungk of Newfleet: “If you get the tech trade wrong, that probably makes or breaks your year.”
The general principle is an old one wearing new clothes. Concentration is not only a stock-market problem.
Clients often believe they own AI on the stock side and safety on the bond side. That deserves a check, because the safe-sounding half still has holdings somebody chose.
Nothing here says your bond fund is broken, and nothing here says sell. It says the boring half now has a live question attached: what does your fund actually hold, and what is it trying to match?
In the Capital Wealth Growth Portfolio we treat this like the S&P 500 concentration talk, just on the other half of the statement. Find out on a calm week rather than a loud one. Bring your statement to a review and we will pull the holdings together.