According to the underwriting division of Goldman Sachs, the record-breaking recent bond transaction by Oracle (ORCL.US) has alleviated tensions in the debt market and provided momentum for other technology giants seeking to raise hundreds of billions of dollars for data center infrastructure construction. Previously, the massive funding required for expansion projects—estimated to reach up to $5 trillion—had sparked recent concerns about oversupply in the debt market. On Monday, Oracle raised $25 billion in bonds in the high-grade bond market, attracting numerous yield-hungry investors with orders exceeding $129 billion, setting a record for such issuances and serving as a positive indicator. Goldman Sachs was among the Wall Street banks involved in the deal.
John Sales, Head of Investment-Grade Bond Underwriting for the Americas at Goldman Sachs, stated in an interview, "Everyone is talking about the record supply, but I think the more interesting aspect is the record demand." Although global publicly issued syndicated bonds surpassed $1 trillion at the fastest pace ever following Oracle's bond sale, the additional compensation investors demand for taking on corporate bond risk is near its lowest level in nearly three decades. U.S. high-grade corporate bond issuance exceeded $200 billion last month, making January one of the top five months for issuance volume on record.
Oracle, which has the lowest credit rating among cloud computing giants, has become a barometer for artificial intelligence investment. As its recent debt traded closer to junk bond levels than investment-grade, some pressure eased after the database giant indicated it does not expect to issue new debt in 2026. Sales noted that this was a clearing event for the market, as it removes a major issuer from the supply pipeline and reduces the likelihood of a near-term credit rating downgrade for Oracle's debt.
According to Sales, prior to Oracle's bond announcement, the risk premium on some of the company's bonds increased by 25 basis points from Sunday evening to early Monday. Admittedly, investors still perceive significant risks associated with AI investments. Anxiety surrounding AI-related transactions has heightened concerns, leading to a loss of over $1 trillion in market capitalization for the Nasdaq 100 Index within a week. Heavy bond issuance by large technology firms could further widen spreads in the sector and across the market this year.
Currently, most of Oracle's newly issued bonds are trading at higher prices in the secondary market. For now, however, the credit market remains broadly optimistic. Sales remarked, "The market is completely open. From a spread perspective, conditions are very favorable. From a demand standpoint, looking at Oracle's order book as an example, conditions are also very strong."
Other hyperscale data center operators may soon enter the market following the earnings season. Amazon (AMZN.US) plans to invest $200 billion in data centers this year, while Google parent Alphabet (GOOGL.US) expects capital expenditures to reach as high as $185 billion, both forecasts exceeding analyst expectations. Meta Platforms (META.US) and Microsoft (MSFT.US) have also reported earnings, positioning them to issue bonds.
Data shows that Goldman Sachs has led approximately 6.8% of U.S. high-grade bond sales this year (excluding self-led deals), ranking as the fifth-largest underwriter. Sales personnel also anticipate concentrated supply periods in the coming months and quarters as issuance windows open post-earnings, with a significant influx of acquisition-related transactions expected to enter the market.