The overseas corporate credit market is sitting in a false calm. Goldman Sachs warns that investment-grade credit spreads are staying flat not because risks have faded, but because the market's biggest bond issuers — AI technology giants — have temporarily stopped raising funds. This window could close within the next two months.

Jeffrey Papai, a credit sales trader at Goldman Sachs, said in a latest report that AI-related bond issuance came to an abrupt halt starting in September 2025, creating a rare breathing room for the market and providing technical support for the spread-tightening rally in the fourth quarter. He believes now is a buying opportunity, but explicitly attaches an expiry date: once AI supply returns to the market, this logic falls apart.

Risks are approaching, including Broadcom's "APCHIP 2.0," SpaceX chip financing, and the Broadcom/OpenAI "Jalapeno" project. Recently, about $150 billion of chip financing has entered preparation or issuance stages.

Goldman Sachs estimates that by 2027, AI-related investment-grade bond issuance with maturities of seven years or less will reach $275 billion, accounting for 20% to 25% of all short-end investment-grade supply, far above this year's roughly 10% share. By then, regional banks, utility companies, and OpenAI's GPU loans will compete for the same pool of insurance funds, putting significant pressure on the credit curve.

Spreads Unmoved Amid an Interest Rate Storm

Over the past six weeks, the rates market has swung violently, with the MOVE index breaking above 110, the Federal Reserve restarting its rate hike cycle, and French sovereign risk spreading — yet investment-grade credit spreads have barely budged.

Historical data shows that in the early stages of the previous two rate hike cycles, credit spreads widened significantly — 27 basis points in the 2015-2016 cycle and 15 basis points in 2022. This time, from August 15 to October 15, spreads widened by only 1 basis point. Meanwhile, the yield on the investment-grade index broke above 6%, touching that level for only the third time since the financial crisis, yet spreads remained stable.

Fund flows also showed resilience. In the six weeks after the Jackson Hole meeting, investment-grade funds saw net inflows of $12 billion, at the 65th percentile since 2020, with $5 billion flowing in last week alone, far above this year's weekly average of about $3 billion.

Corporate Credit Premiums Compressed to Historic Lows

Behind the market calm lies another concern: the extra compensation investors demand for holding corporate bonds has been compressed to a historic low.

Papai noted that last month, investment-grade spreads as a share of total yield fell below 13% for the first time, hitting historic lows in both nominal and percentage terms. By comparison, during the peak stress periods of 2008 and 2020, this ratio exceeded 80%. France shows a similar anomaly — about 25% of French corporate bonds now yield less than French government bonds, with the market effectively viewing LVMH's credit quality as better than that of the French Republic.

Papai interprets this as investors becoming "increasingly comfortable with the overall credit condition of non-AI companies." But it also means that when risks truly arrive, the market's buffer is extremely limited.

AI Borrowers Are Already "Dragging Down" the Index

It is worth noting that Papai repeatedly uses the qualifier "non-AI" in his report, because AI technology giants are becoming a hidden concern within the index.

After removing Oracle, Microsoft, Google, Amazon, Meta, Nvidia, AMD, SuperMicro, and Broadcom from the investment-grade index, the remaining components are about 2 to 2.5 basis points tighter than the overall index; a year ago, that difference was about 0.5 basis points wider. At the same time, these nine companies' share of index market value has risen from less than 4% to more than 6%, and their share of index duration has climbed from less than 5% to nearly 8%.

There are already clear signals at the individual bond level: Broadcom's 5-year credit default swap was quoted at 136 basis points last week, a record high; Oracle was quoted at 261 basis points over the same period, also a record.

A Supply Gap Has Created a False Calm

Papai directly identifies the real reason for the market calm: there is currently no AI-related supply.

Statistics show that since September 2025, the market has entered a gap of more than two months with no large AI bond issuance — the first time since the start of the AI capital expenditure buildout that there have been two consecutive months without any single AI bond issuance exceeding $3 billion. Looking back from September 2025 to now, there were 23 AI-related deals of $3 billion or more, totaling $378 billion, with no new additions in September or October.

This pattern closely matches the performance of Goldman Sachs' AI credit basket: the early stage of each issuance wave corresponds to significant spread widening, while supply off-seasons (such as May and September) correspond to credit spread tightening. Combined with near-zero net supply in the fourth quarter, historical seasonal effects, and falling rate volatility, Papai describes this as the technical basis for a "Christmas spread-tightening rally."

$150 Billion of Chip Debt Is Looming, with the Short End Most Exposed

However, this calm is about to be broken.

According to The Wall Street Journal and the Financial Times, Broadcom's "APCHIP 2.0" Anthropic TPU project, SpaceX chip financing, the Broadcom/OpenAI "Jalapeno" project, and Oracle/Nvidia GPU financing have recently launched one after another, totaling about $150 billion, plus more than $20 billion still unfinished from "APCHIP 1.0," supply pressure is already building.

More noteworthy is the shift in the direction of impact. Previously, AI-related duration supply was mainly concentrated in the long-end TMT sector, but because GPUs and TPUs have shorter depreciation cycles, future issuance will be concentrated in maturities of seven years or less. Goldman Sachs estimates that by 2027 this portion of supply will reach $275 billion. By then, regional banks, utility companies, and industrial firms rolling over 5-year bonds will compete directly with OpenAI's GPU loans for the same group of insurance funds, and the credit curve is expected to flatten.

On the demand side, the main buyers are currently insurance companies. Papai noted that some insurers' confidence in this paper is partly derived from the stock market value of the relevant companies. This means that once share prices fluctuate, the foundation of the credit logic will also be shaken.

Once 2027 arrives, the AI supply machine will return to the market with $150 billion of chip debt, absorbed by insurance companies whose credit analysis partly depends on issuers' stock market value, while the banks arranging the deals refuse to hold it themselves. Papai makes it clear that the validity period of this rally is "until AI supply approaches in 2027." Christmas may bring spread tightening, but the bill will arrive in January.