Goldman Sachs highlights three relative-value themes in AI-related credit: underweight IG technology, favor shorter maturities and selected datacenter bonds

Overview

This report discusses three medium-term relative-value themes amid expanding supply of AI-related credit. Goldman Sachs believes that issuance by hyperscalers and across the AI value chain has become a central issue for credit markets, but supply spans multiple currencies, maturities, and financing structures, so simple valuation comparisons are insufficient to explain the opportunities and risks. Overall, the report shifts to underweight on USD and EUR investment-grade technology bonds, remains neutral on USD high-yield technology bonds, and shifts to underweight on smaller EUR high-yield technology bonds with greater software exposure.

Core views

The core views include: first, a preference for shorter-dated AI-related corporate bonds, as long-end bonds are more affected by higher term premiums, buyer concentration, and comparisons with equity relative value; second, a selective approach to carry opportunities between datacenter construction bonds and corporate bonds, recognizing their security structures and complexity premiums while emphasizing future supply, refinancing, and differentiation in project quality; third, the lead of EUR technology bonds over USD may narrow as euro-market supply accelerates, but the nearly 40% share of European domestic issuers should help buffer the technical pressure from hyperscaler issuance over the medium to long term.

Analysis framework

The report uses cross-sector, cross-maturity, and cross-currency credit relative-value analysis, comparing spread performance, supply pressure, term structures, and investor bases across AI-related corporate bonds, hyperscaler bonds, datacenter construction financing bonds, and USD/EUR technology bond indices.

Methodology notes

• credit_relative_valueCredit relative-value analysis

  Compare the spreads and carry compensation of different bond types, maturities, and currencies.

  The report does not treat AI-related credit as a single asset class, but distinguishes between short-end and long-end bonds, corporate bonds and project-finance bonds, and USD and EUR markets to identify exposures with more attractive risk compensation.

• term_structureTerm-premium analysis

  Long-end AI-related credit requires higher spread compensation.

  AI-related issuance tends to have long duration; rising supply and uncertainty over capital-expenditure returns push up long-end spreads, leading the report to favor shorter-dated bonds.

• market_technicalSupply technicals analysis

  Issuance pace and buyer absorption capacity affect spreads.

  The report believes that hyperscaler financing needs will continue to weigh on technology bond performance, particularly when the supply path remains unclear and long-end buyers become more price-sensitive.

• cross_currencyUSD/EUR credit-market comparison

  Compare the relative performance of USD and EUR technology bonds amid supply shocks.

  The report expects the EUR market to converge toward USD as cross-border issuance increases, but the higher share of European domestic issuers means that the technical pressure from AI supply on EUR technology bonds will be relatively diluted.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• shorter-dated AI-related corporate bonds

  preferred

  Strengths

  Less exposed to long-end term premiums and uncertainty over long-term AI capital-expenditure returns.

  Weaknesses

  Still affected by overall AI-related supply and market sentiment.

  Comparison

  More defensive than long-end AI corporate bonds.

  Risks

  If short-term technicals improve or the market resumes pursuing duration, short-end relative performance may lag.

• long-end AI-related corporate credit

  cautious

  Strengths

  Offers potential for spread recovery if AI investment returns and the future supply path become clearer.

  Weaknesses

  Heavy long-term supply, greater buyer concentration, and a higher hurdle for comparison with equity valuations.

  Comparison

  Subject to a higher term premium than short-end bonds.

  Risks

  Continued upward revisions to capital-expenditure expectations, unclear ROI, and uncertainty over the ultimate beneficiaries may weigh on spreads.

• datacenter construction bonds

  selective allocation

  Strengths

  Typically offer senior secured structures, complexity premiums, and higher carry, while being less directly sensitive to marginal changes in the ROI of AI capital expenditures.

  Weaknesses

  Supply in this emerging asset class remains moderate for now, but future issuance may increase and differentiation among individual bonds may widen.

  Comparison

  Relative to hyperscaler corporate bonds, some datacenter construction bonds depend more heavily on project terms and offtake structures.

  Risks

  Construction risk, refinancing risk, declining offtaker quality, and limitations on inclusion in IG indices due to 144A-for-life structures.

• USD IG Technology

  underweight

  Strengths

  High market depth and coverage of large technology and AI-related issuers.

  Weaknesses

  Most directly exposed to the supply shock from hyperscaler AI financing.

  Comparison

  The report expects it to remain under pressure relative to the broader USD IG index.

  Risks

  The sector could rebound in the short term if capital-expenditure expectations are revised lower or issuance slows.

• EUR IG Technology

  underweight but with a long-term buffer relative to USD

  Strengths

  A high share of European- or UK-registered issuers helps dilute supply pressure from US hyperscalers.

  Weaknesses

  Increased cross-border issuance may narrow the spread differential between EUR and USD technology bonds.

  Comparison

  Its relative spread advantage over USD may decline in the short term, but its long-term sector exposure may remain more supportive than USD.

  Risks

  If AI-related supply in the EUR market accelerates more than expected, the buffering effect may weaken.

• USD HY Technology

  neutral

  Strengths

  Higher yields and greater diversity among issuers and structures create a more balanced opportunity set.

  Weaknesses

  High-yield credit itself is more sensitive to financing conditions and fundamentals.

  Comparison

  Unlike IG technology bonds, high-yield technology bonds are not uniformly downgraded to underweight.

  Risks

  If AI sentiment deteriorates or financing conditions tighten, lower-quality issuers may come under pressure.

• EUR HY Technology

  underweight

  Strengths

  Provides exposure to high-yield technology.

  Weaknesses

  Smaller market size and greater software exposure.

  Comparison

  The report is more cautious on EUR HY Technology than on USD HY Technology.

  Risks

  Software exposure and lower market liquidity may amplify the impact of adverse sentiment.

Key data

• Hyperscaler year-to-date cross-currency issuance volume$194 billionThe report states that this issuance volume already accounts for nearly one-fifth of CHF and CAD issuance.
• EUR IG Technology spread relative to USD IG Technology10bp tighterThe report states that EUR IG Technology has currently tightened by 10bp relative to the comparable USD sector.
• EUR TMT spread relative to USD TMT15bp tighterThe report states that EUR has tightened by 15bp relative to USD in the broader TMT sector.
• Share of European- or UK-registered issuers in EUR IG Technologynearly 40%This composition is viewed as a key factor buffering EUR technology bonds against hyperscaler issuance pressure over the long term.
• Datacenter construction transactions as a share of total AI-related supplynot more than a thirdThe report states that datacenter construction transactions have so far accounted for no more than one-third of total AI-related supply, but project-finance issuance is expected to increase in the future.

Impact & implications

For investors, AI-themed credit should not be approached simply by pursuing sector beta; greater attention should be paid to maturity, issuance structure, currency, and issuer quality. Short-end AI corporate bonds are relatively preferred; long-end AI credit will continue to face spread pressure until supply and ROI transparency improve; datacenter construction bonds remain attractive for their yield, but will gradually shift from benefiting from new-asset-class premiums toward project and issuer selection; EUR technology bonds may be weighed down by supply in the short term, but retain structural support relative to USD over the long term.

Risks

• Uncertainty over AI capital-expenditure returns and the ultimate beneficiaries may continue to suppress long-end AI credit spreads.
• Rapid supply from hyperscalers and across the AI value chain may cause technology credit to underperform broader credit indices.
• The long-end buyer base is relatively concentrated and may become more price-sensitive when supply is opaque.
• As future supply of datacenter construction bonds increases, project quality, offtaker quality, and refinancing risk may lead to greater differentiation.
• If the EUR market absorbs more cross-border AI-related issuance, its current spread advantage over USD may narrow.

What to watch

• The future pace, currency distribution, and maturity structure of AI-related bond issuance.
• Hyperscaler capital-expenditure guidance and market visibility into AI investment returns.
• Whether long-end AI credit spreads receive support from improved supply forecasts or greater ROI transparency.
• The volume of datacenter project-finance issuance, construction progress, offtaker quality, and refinancing terms.
• Whether the share of US hyperscalers in EUR IG Technology increases and whether the buffer provided by European domestic issuers persists.