The AI-led borrowing frenzy could end up driving interest rates higher, Apollo's chief economist says

• AI spending from Big Tech hyperscalers is expected to surge again in 2026.
• Torsten Sløk of Apollo thinks AI-driven corporate borrowing could drive up interest rates.
• He said that new investment-grade bond issuance could pull buyers away from the Treasury market.

A top economist has a fresh warning about debt-fueled capex spending in 2026.

Torsten Sløk, the chief economist at Apollo Global Management, flagged expectations that AI hyperscalers will be significant drivers of investment-grade bond issuance this year. In his view, the flood of new bonds into the market as tech companies look to fund their data centers and other infrastructure is bound to put upward pressure on interest rates.

The issue is that more corporate debt issuance could drag buyers away from other bond markets.

"The significant increase in hyperscaler issuance raises questions about who will be the marginal buyer of IG paper," he wrote. "Will it come from Treasury purchases and hence put upward pressure on the level of rates? Or might it come from mortgage purchases, putting upward pressure on mortgage spreads?"

The economist noted that Wall Street banks can't agree on just how high the borrowing wave will go in 2026, but they all forecast issuance to be high, with analysts eyeing $1.6 trillion to $2.25 trillion of investment-grade bond sales this year.

However, for Sløk, the main takeaway is that heavy corporate borrowing could ultimately drive interest rates higher more broadly.

"The bottom line is that the volume of fixed-income products coming to market this year is significant and is likely to put upward pressure on rates and credit spreads as we go through 2026."

Sløk said investors should be assessing how the AI buildout, specifically the construction of more data centers and other infrastructure, will be paid for.

Companies such as Alphabet, Amazon, Meta, Microsoft, and Oracle collectively issued $100 billion of bonds in 2025. According to Bank of America, that's more than double the amount they raised in the previous year.

Slok isn't the only economist to raise concerns about the broader economic impact of high AI spending. Mark Zandi, chief economist at Moody's Analytics, recently said that tech borrowing eclipsed levels seen during the dot-com era, adding that if the tech sector's growth stalls, the results could be dire.