PIMCO says AI borrowers now drive nearly half of long-dated US investment-grade issuance

The AI boom has picked up a new habit: borrowing for a very, very long time.

PIMCO’s Lotfi Karoui says AI-related borrowers accounted for nearly half of year-to-date gross supply in the non-financial slice of the US investment-grade corporate bond market for maturities beyond 15 years, as of late October 2026. That puts a lot of one theme in one corner of the credit market, and the bond giant thinks investors should start looking elsewhere for balance.

Karoui is a managing director and multi-asset strategist at PIMCO. His view is that AI-related issuance now weighs heavily on the broader debt market, and that credit portfolios built on corporate bonds alone are becoming less diversified than they look.

Who is doing the borrowing

According to PIMCO, the surge is largely tied to the financing needs of hyperscalers and data centers as they scale up AI infrastructure. Hyperscalers are the giant cloud computing companies that rent out server capacity, and lately they have been building it at a pace that requires serious funding.

Their appetite skews long. Hyperscalers have shown a preference for 30-year bonds, capturing over 30% market share in that maturity compared with approximately 13% for 10-year bonds in certain periods.

PIMCO has also flagged a broader shift in how AI capital expenditure gets funded. Spending that was once supported by operating cash flow is increasingly being financed with debt, which the firm describes as a substantial change in how these companies pay for growth.

That matters because cash-funded expansion and debt-funded expansion carry very different risks. When a company spends its own profits, shareholders absorb the outcome. When it borrows, bondholders get a front-row seat.

Where PIMCO wants investors to look instead

Karoui’s prescription is to diversify away from AI-heavy corporate credit without abandoning quality. His suggested destinations are agency mortgage-backed securities, higher-rated private mortgage bonds, and emerging-market debt.

Agency MBS are bonds backed by pools of home loans and tied to US government-sponsored housing agencies. Non-agency residential MBS are their private-label cousins, and PIMCO’s preference there is for the higher-rated end of the market.

The pitch rests on two points: lower correlation and better carry. Lower correlation means these assets tend not to move in lockstep with AI-heavy corporate bonds, while carry refers to the income an investor earns simply by holding the bond.

Emerging-market debt rounds out the list. PIMCO sees it, alongside high-quality securitized products, as offering better risk diversification and attractive yield relative to corporate investment-grade bonds dominated by AI names.

The politics of data centers

There is a political wrinkle. PIMCO noted that the November 2026 US midterm results posed potential challenges for the data-center sector, since proposed restrictions could affect development timelines.

The firm believes those developments may slow data-center construction and issuance. However, PIMCO does not expect them to meaningfully alter the overall financing needs of the AI build-out.

PIMCO is trimming, not leaving

The firm is also practicing what it preaches. PIMCO has reduced its holdings in AI data-center financings by about 50% in certain cases, including investments linked to Meta and Oracle.

It has not walked away from the theme entirely. The firm continues to participate selectively in other deals, which suggests the concern is concentration rather than the underlying credit quality of AI borrowers.

What this means for bond investors

The most immediate implication is for anyone who owns broad long-duration investment-grade corporate bond exposure. If AI borrowers account for nearly half of new long-dated non-financial supply this year, passive buyers of that market are taking a sizable AI bet whether they intended to or not.

The shift from cash-funded to debt-funded AI capex adds another layer. As more of the build-out is financed with borrowed money, the health of the corporate bond market becomes more closely tied to whether these massive infrastructure bets pay off over decades, not quarters.

For allocators, PIMCO’s framework offers a fairly practical playbook. Keep investment-grade quality, but source it from places like agency and higher-rated non-agency mortgage bonds and emerging-market debt that do not share the same exposure.