By Matt Tracy

WASHINGTON, Jan 15 (Reuters) - U.S. corporate bond issuance is expected to increase substantially in 2026, driven in part by AI hyperscaler companies' build-out needs, analysts forecast.

While pent-up M&A activity and a need by companies to refinance existing debt will likely contribute to higher overall corporate bond issuance this year, the biggest factor will be AI-related funding needs, according to a Thursday report from Barclays.

Overall U.S. corporate bond issuance is expected to reach $2.46 trillion in 2026, up 11.8% from $2.2 trillion in 2025, according to Barclays analysts. They forecast $945 billion in net issuance this year, up 30.2% from $726 billion last year.

"The increase in net supply is largely a non-financial story, and the biggest upside risk is AI hyperscaler capex, which could require more jumbo public deals than typical," the Barclays analysts wrote.

AI companies have rapidly increased their spending, as well as their borrowing, as they race to expand their data center presence and processor needs.

The five major AI hyperscalers - Amazon AMZN.O, Alphabet's GOOGL.O Google, Meta META.O, Microsoft MSFT.O and Oracle ORCL.N - issued $121 billion in U.S. corporate bonds last year, versus an average $28 billion per year between 2020 and 2024, according to a January 9 report by BofA Securities.

BofA analysts similarly expect hyperscaler borrowing to accelerate this year. They expect the Big Five hyperscalers to borrow roughly $140 billion annually over the next three years, which may exceed $300 billion annually, the analysts wrote.

The anticipated ramp-up would put the Big Five hyperscalers on pace with the Big Six banks' expected average $157 billion issuance annually, according to BofA.

"More supply to fund AI could make the five hyperscalers some of the largest issuers in the IG index," the BofA analysts wrote.

Hyperscalers made up four of the five biggest U.S. high-grade bond deals in 2025, according to a December report by MUFG analysts. Most of those took place in the second half of the year.

Oracle sold $18 billion in bonds in September. This was followed in October by Meta's $30 billion deal - the largest-ever individual non-M&A high-grade bond sale - and November deals from Alphabet ($17.5 billion) and Amazon ($15 billion).

The hyperscaler borrowing surge has widened credit spreads, causing investors to increasingly turn to credit default swaps (CDS) to hedge against AI-related downside risks.

The cost to insure hyperscaler debt through CDS has risen since June 2025, most notably for Oracle, whose five-year CDS has more than tripled since its September deal, according to MUFG.

Bondholders sued Oracle on Wednesday, saying they suffered losses because the company chaired by billionaire Larry Ellison failed to disclose it needed to sell significant additional debt to build out its AI infrastructure.

(Reporting by Matt Tracy in Washington; Editing by Lisa Shumaker)

((Matt.Tracy@thomsonreuters.com; +1 571 643 3562))