The AI Boom Brings Flood of Debt to Ultrasafe Market

The artificial intelligence boom that has driven US economic growth in recent years now relies heavily on credit markets to finance investments, with utilities emerging as key borrowers. This trend has the potential to transform one of the safest parts of the corporate-bond market into a slightly riskier one. According to data from Bloomberg, the utilities sector has seen a 25% increase in bond issuance over the past year, with a total of $143 billion in new debt raised in 2025 alone.

This surge in borrowing is largely driven by the need for utilities to finance the construction of new data centers and other infrastructure to support the growing demand for AI services. Amazon Web Services, for example, has invested heavily in building out its data center network, with plans to spend $10 billion on new facilities in 2026. Other companies, such as Microsoft and Alphabet, are also expanding their data center capacity to meet the increasing demand for AI computing power.

The impact on the corporate-bond market is significant. The utilities sector, which was once considered one of the safest parts of the market, is now seeing a significant increase in borrowing costs. According to data from S&P Global, the average yield on utility bonds has risen by 50 basis points over the past year, to 3.25%. This increase in borrowing costs is likely to weigh on valuations, making it more expensive for companies to raise capital.

The industry's profits could also face pressure as regulators try to keep a lid on rate increases. The Federal Energy Regulatory Commission (FERC) has been cracking down on utilities that seek to pass on the costs of new infrastructure to consumers. In 2025, FERC rejected a request by a major utility to raise rates by 10% to finance new data center construction. This decision has sent a clear signal to the industry that regulators will not tolerate excessive rate increases.

The AI boom has brought significant benefits to the US economy, including the creation of new jobs and the stimulation of innovation. However, the reliance on credit markets to finance investments has also introduced new risks. As the utilities sector continues to grow, it will be important for regulators to strike a balance between encouraging investment and protecting consumers from excessive rate increases.

In the coming years, the utilities sector is likely to continue to play a critical role in supporting the growth of the AI industry. As the demand for AI computing power continues to rise, companies will need to invest heavily in new infrastructure to meet that demand. The challenge for regulators will be to ensure that these investments are made in a way that is sustainable and equitable for all stakeholders.

In conclusion, the AI boom has brought a flood of debt to the ultrasafe market, with utilities emerging as key borrowers. While this trend has the potential to transform the corporate-bond market, it also introduces new risks and challenges for regulators. As the industry continues to grow, it will be important for policymakers to strike a balance between encouraging investment and protecting consumers from excessive rate increases.