Goldman Sachs raises its forecast for bond issuance in 2026 to $2.3 trillion, with AI demand as the

Goldman Sachs raises its forecast for U.S. investment-grade credit bond issuance: AI investment drives the market to a new high

Goldman Sachs predicts that U.S. investment-grade credit bond issuance this year will reach US$2.3 trillion, higher than its previous estimate of US$2.1 trillion. This number continues to climb as companies continue to borrow to fund artificial intelligence (AI) investments. The bank also raised its net supply forecast from $850 billion to $1.0 trillion. In addition, Goldman Sachs pointed out that it expects to maintain stable and high market activity until 2027, so it sets a forecast for the total supply of US dollar investment-grade bonds at US$2.4 trillion.

According to Goldman Sachs data, so far, 24% of U.S. investment-grade bond issuance during the year originated from AI-related issuers, pushing the market to a record high. In contrast, AI-related issuers accounted for only 6%, while overall circulation increased by only 2%.

Interest rate volatility will remain the dominant factor

Goldman Sachs expects market activity to pick up significantly in September. "The summer downturn is difficult to achieve-largely due to increased AI-related supply, and market participants generally expect September to be a busy trading month," the bank said in a report on Thursday.

Currently, ultra-large technology companies are increasingly turning to the euro investment-grade credit bond market. Goldman Sachs said the move could narrow the euro's structural advantage over the dollar. Still, given the poor performance of both currencies year-to-date, the financial institution still expects interest rate volatility to continue to be the dominant factor in determining total returns.

Overall, corporate bond spreads have remained almost unchanged this year. On the contrary, soaring government yields in the United States and Germany have severely eroded investment returns. If the current interest rate level continues, it will cause material damage to the rate of return. However, the company's forecast that yields will fall soon will relieve some of the pressure, although the total return will likely remain below the historical benchmark.

Recently, German 10-year bond yields hit their peak since 2011, while U.S. 10-year bond yields rose to their highest level since November 2023. Goldman Sachs pointed out that U.S. yields surged 61 basis points and Germany surged 52 basis points, directly offsetting a large portion of U.S. corporate bond yields and eliminating the interest-rate safety cushion on European corporate debt.

U.S. companies hold approximately US$46 billion in outstanding bonds in the euro zone

Overall, U.S. companies hold approximately US$46 billion in outstanding bonds in the euro zone, which, although accounting for the largest share of the overall market, is close to 10% of total new issues. Amazon and Alphabet are the main corporate issuers this year.

According to a blog post from the European Central Bank, U.S. companies hoarding large amounts of debt may push up interest rates for various companies. 'They account for a huge share of the bond market, and the pain could easily spread to government bonds and international agency debt,' the article wrote.

In addition, bloggers believe that the flood of new bonds issued by technology giants may overwhelm investor demand. As supply expectations continue to rise, this overcrowding could force other companies in the market to pay higher interest rates to attract buyers, especially since investors have limited funds to deploy.

AI investment is reshaping corporate bond markets

The surge in AI-related lending reflects the vast amount of capital needed to build and expand AI infrastructure. Hyperscale technology companies and other technology companies are investing heavily in data centers, advanced computing systems, network equipment and energy infrastructure to support the rapid growth of AI applications.

Most of these investments require large amounts of upfront capital, which is why the corporate bond market has become a key source of financing for companies to rapidly develop AI capabilities without having to rely entirely on cash on hand.

However, given the growing issuance of AI-related companies, investors face a situation where opportunities and risks coexist. Large technology companies often have strong balance sheets and huge cash flows, making their debt attractive to investors seeking high-quality corporate bonds.

At the same time, such a large new supply could test how much additional debt the market can absorb without requiring companies to provide higher yields. The trend could also affect broader credit markets. If major technology companies continue to dominate new issues, other corporate borrowers may need to compete more aggressively for investor capital. That could push up borrowing costs for companies with weaker credit ratings, especially if government bond yields remain high.

Therefore, Goldman Sachs 'upward adjustment in its issuance forecast not only highlights the strong momentum of corporate lending, but also highlights the growing financial impact of the AI investment cycle. As companies race to expand their AI capabilities, bond investors will increasingly need to assess whether the expected long-term returns on these investments are sufficient to justify the additional debt they have accumulated.

Goldman Sachs experts warn: Be wary of excessive reliance on AI

Even if more companies continue to invest in AI, it does not mean that the technology is completely risk-free. Earlier, Chris Churchman, head of Goldman Sachs Marquee, expressed concern that excessive reliance on artificial intelligence could weaken the analytical capabilities of future financial analysts.

He believes that increasing reliance on automation may blunt practitioners 'ability to basic logic and independent raw reasoning. "There is a huge danger here that in the AI era, we are outsourcing reasoning to these models, causing cognitive shrinkage and making it impossible for us to reason from first principles ourselves," Churchman asserted.

He also emphasized that Wall Street needs to adopt AI without undermining the traditional mentor system. He admitted that banks are still trying to figure out how to leverage the technology while protecting the real-world wisdom that employees can only gain through hands-on experience.