AI Spending Fueled Global Capital Costs
Increased infrastructure investment and government borrowing pushed corporate debt and equity issuance higher in 2026.
Updated on Sept. 19, 2026 in Corporate Finance
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Capital expenditure for AI infrastructure and increased government borrowing drove up global capital costs throughout the second quarter of 2026. Companies responded to this demand by significantly increasing their debt and equity issuance to fund major projects.
Why it matters
The intense competition for capital across both private and public sectors has effectively ended the era of near-zero bond yields. This shift forces a re-evaluation of valuation models as higher funding costs compete with potential earnings growth.
Goldman Sachs increased its total US investment-grade gross issuance forecast by 200 billion USD, bringing the projected annual total to 2.3 trillion USD. AI-related firms now account for 25 percent of all US investment-grade gross supply.
The players
Goldman Sachs
This global financial institution provides investment banking, securities, and investment management services to a diverse client base.
The details
Capital expenditure by AA-rated issuers surged 65 percent year-on-year in the second quarter of 2026, marking 10 consecutive quarters of growth exceeding 35 percent. These investments are heavily concentrated in AI infrastructure, while governments have simultaneously increased borrowing for energy security and defense.
Timeline
In 2022, 30-year government bond yields in Germany and Japan hovered near zero.
During Q2 2026, AA-rated issuer capital expenditure increased by 65 percent year-on-year.
As of year-to-date 2026, US convertible bond issuance reached 135 billion USD.
Market Dynamics
The current environment marks a decisive departure from the 2022 global interest rate environment in Germany and Japan, where bond yields were near zero. This pivot to higher cost of capital signifies a structural change in how corporations and governments finance long-term growth.
Retail and institutional investors must account for higher borrowing costs that may limit valuation expansion for companies heavily reliant on debt. With rising yields, equity prices face downward pressure if corporate earnings growth fails to outpace the increased cost of capital.
The takeaway
The transition to a higher-rate environment suggests that cheap capital is no longer a tailwind for aggressive corporate expansion. Investors should prioritize balance sheet strength and earnings quality over speculative growth as funding costs normalize.
Further reading
For more on the current state of markets, visit the Corporate Finance section.
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