AI boom pushes convertible bond investors to accept less protection

Investors seeking exposure to the artificial intelligence boom are accepting weaker protections in convertible bond deals, Bloomberg reported, pushing the market toward risk levels last seen during the pandemic.

Coupons on some new issues are approaching zero as buyers prioritize potential gains in the issuers’ shares. That reduces the income that normally cushions convertible investors when stocks fall.

Global convertible-bond issuance has reached $147 billion so far this year, more than 50% above the same period in 2025 and already higher than the previous annual record set in 2021. Technology companies have driven much of the increase.

Nebius Group recently raised $4.5 billion through convertible bonds after issuing another $9.75 billion, with its 2030 notes carrying coupons of 0% to 0.5%. The average delta, a measure of equity sensitivity, is about 64%, near its highest level since 2021, according to Bloomberg data.

Portfolio managers said investors need to assess individual issuers and bond terms as convertibles become more equity-like. The shift leaves holders increasingly dependent on future stock gains rather than coupon income.