AI financing fueling a surge in U.S. convertible bond sales

U.S. convertible bond sales surged to US$34 billion in the first four months of 2026, more than double the same period last year, according to Bank of America Global Research and Barclays Research. The market is on track to exceed last year’s full-year record of over US$120 billion, with roughly half of this year’s issuance linked to AI-focused companies. Companies are using convertible debt to fund AI-related capital expenditures, including data centers, power infrastructure, and cloud expansion. Major deals include Oracle’s US$5 billion raise, CoreWeave’s US$4 billion offering, and IREN Limited’s US$2.6 billion issuance. Power companies like NextEra Energy and chip makers such as On Semiconductor also tapped the market, raising US$2.3 billion and US$1.3 billion respectively. A wave of refinancing is contributing to the surge, as companies roll over pandemic-era convertibles nearing maturity. Duke Energy and Microchip Technology issued US$1.5 billion and US$900 million in recent refinancings. Convertibles remain attractive in the current high-rate environment, offering fixed payments with the option to convert into equity if stock prices rise. The bonds appeal to investors due to their embedded call option, which gains value with equity volatility. Tempus AI, an AI-driven health tech firm, raised US$400 million with a zero-coupon convertible bond set to convert at US$69.26 per share, about 40% higher than its May issuance price. High Treasury yields have raised borrowing costs, making convertibles a preferred alternative to traditional debt or equity dilution. Hedge funds and asset managers dominate convertible investing, drawn by the volatility and AI sector’s growth potential. Barclays’ Venu Krishna noted that institutional investors are buying exposure to semiconductors, the hottest AI-driven market segment. Even riskier issuers, like WhiteFiber, have entered the market, raising US$230 million for data center expansion despite a negative forward P/E ratio. Analysts warn that while demand remains strong, the market’s expansion reflects both AI’s funding needs and investor speculation on equity upside.