AI investment, M&A poised to increase corporate financing needs next year
Meghan Graper, global head of debt capital markets at Barclays, said the financing needs of the five largest US technology firms could reach almost $100 billion by 2026. Big tech firms are aggressively turning to debt markets in their race to build AI-ready data centers; This is a shift for Silicon Valley firms that typically rely on cash to fund investments.
Since September, public bond issuance by four major cloud computing and AI platform companies, known as “hyperscalers,” has reached nearly $90 billion.
M&A Deal Backlist
The large backlog of mergers and acquisitions that may require financing will also be an important factor in increasing export volume. Currently, there are $175 billion in announced mergers and acquisitions among investable companies; That’s more than double the $75 billion the previous year.
Anish Shah, Morgan Stanley’s head of global debt capital markets, expects activity from private equity firms or sponsors to increase. “The biggest catalyst is that sponsors have much more confidence in bringing assets to market if they know they can run a credible dual track and that an IPO is in fact a viable alternative. Our IPO backlog for sponsors is at its highest post-COVID,” he said.
Shah is also optimistic about a higher volume of major merger and acquisition deals next year.
Investors aren’t concerned about the potential for cyclical financing among big tech and AI companies like OpenAI, executives said. “If you look at what we’re financing, the credit is backing existing assets; they’re out in the middle of the desert somewhere,” said Marc Baigneres, JPMorgan Chase’s global co-head of investable finance, referring to data centers.
Cash flows of lending companies are highly diversified, Shah said. “Their investments individually represent very small components of their businesses overall. I don’t think there is a systemic risk,” he added.
