EU pension funds buying into US AI boom, as ECB warns credit ratings may be understating future risk
Amsterdam
31 August 2026 16:12
European pension funds and insurers are increasingly financing the US artificial intelligence boom, buying long-dated bonds that credit rating agencies regard as safe.
Hyperscaler debt “may look like a possible alternative to some safe-haven style securities”, ECB analysts wrote in a blog on Monday (31 August).
But they also warned that these bonds could become less safe as AI companies continue to take on more debt in the coming years.
Hyperscaler debt refers to corporate bonds and loans issued by Big Tech companies such as Microsoft, Meta, Google, Amazon, and Oracle to finance massive costs of building AI and cloud infrastructure.
Ratings may be based on “assumptions on future revenue growth and leverage which may not stand the test of time”, creating a risk of “mispricing of credit risk,” the ECB’s financial experts wrote.
Large European institutional investors, primarily pension funds and insurers, looking for safe places to park large sums for long periods, have traditionally bought sovereign bonds — German ones in particular.
But US tech giants looking for ever more sources of finance have started to issue corporate bonds with long maturities, often longer than 15 years, especially attractive to such investors.
Just five companies, Alphabet, Amazon, Meta, Microsoft and Oracle, accounted for 15 percent of the growth in euro-denominated corporate bond holdings by euro area investors in the year to March 2026, according to the ECB blog.
Buying up large amounts of long-dated corporate bonds might crowd out demand and push up yields for government debt.
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There are already signs this has already happened in the US but so far the ECB experts found no signs of such spillovers taking place in the euro area.
For that, the total amount is still too small. US tech firms have around €40bn of euro-denominated bonds outstanding, or just over one percent of the eurozone’s corporate bond indices.
But that share is growing fast. Nearly 10 percent of all new euro bonds sold by non-financial companies now come from Big Tech.
“US big tech companies could push up borrowing costs for all sectors as they accumulate debt and account for a growing share of bond market,” the ECB’s analysts found.
Unprecedented wave
Credit rating agencies rate this debt as highly safe, often at AA- or above, which is close to the highest level, in a euro market where most corporate issuers are rated lower (between A and BBB).
The ECB gives several reasons why such credit assumptions may be too rosy. For one, the balance sheets look strong now, but the wave of debt issuance is still in its early stages.
Big Tech is projected to need more than $1 trillion [€860bn] of capital spending by 2028, and the ECB flags that this figure is at the lower end of what credit analysts expect.
“This could be merely the start of a financing wave of unprecedented proportions,” the analysts wrote.
It is also clear that planned investments can no longer be funded through the cash the companies generate themselves, meaning that borrowing will fill in a higher proportion of financing needs in the future.
Finally, even at this early stage, investors are already demanding more compensation.
“Investors are demanding a rising risk premium to absorb the supply and deal with the greater uncertainty over the medium-term earnings outlook,” the ECB analysts wrote.
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Inflated earnings?
There are already signs those earnings are themselves inflated.
Big tech booked a windfall of more than $160bn last quarter from stakes in other AI companies rather than from money the firms earned themselves, the Financial Times reported over the weekend, raising concerns that “paper gains are overstating the strength of the AI boom.”
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The ECB’s analysts, for their part, flagged the risk of fast-rising leverage, particularly “if other, less transparent, debt markets start being tapped.”
“The sheer scale of hyperscalers’ future borrowing needs … warrants close monitoring,” the ECB’s analysts concluded.
This article was updated
canisgallicus 