Analysis: global AI-related companies drove ~40% of benchmark convertible bond index returns in 2025, pushing the amount raised to $166.5B, the most since 2001
Companies around the world are issuing convertible bonds at the fastest pace in 24 years, as the development of artificial intelligence spurs a hunt for cheaper financing.
Context & Ripple Effects
This extends a broader debt-financing story: US investment-grade issuance approached a prior peak as AI infrastructure borrowing rose, while tech companies had already tapped bond markets heavily for AI-related spending. The convertible market adds an equity-linked funding channel to that surge in AI-driven investment-grade borrowing.
The financing backdrop is uneven. Prior coverage found that smaller AI infrastructure companies faced higher borrowing costs amid concern about unproven businesses, making strong convertible-market returns especially relevant to which issuers can access capital on favorable terms.
First-order effects
- AI-related issuers gain a more receptive convertible-bond market for raising capital, alongside the conventional bond issuance already supporting AI infrastructure.
- Benchmark convertible returns become more concentrated in AI-linked securities, increasing the sector's immediate influence on performance for convertible-bond investors.
Second-order effects
- Demand for AI-linked convertibles can improve financing flexibility for qualifying issuers, while companies without comparable investor confidence may remain exposed to the higher rates facing smaller AI infrastructure borrowers.
- Convertible investors and underwriters have an incentive to devote more attention to AI-related deals, potentially shifting issuance and portfolio allocations away from less favored sectors.
Third-order effects
- AI buildout financing is broadening beyond equity and straight debt into instruments that combine debt funding with potential equity upside, deepening the financialization of infrastructure spending.
- If AI-linked returns remain a dominant driver, access to lower-cost hybrid capital could increasingly separate established or market-favored AI companies from smaller, less proven competitors.
The trend: AI infrastructure investment is becoming increasingly financed through a wider mix of public-market debt and equity-linked instruments, with capital costs diverging by issuer credibility.