AI Borrowing Is Raising the Cost of Capital Everywhere

What Is Measurable Today

Before any scenario, the observable facts need separating from the speculation.

The scale of borrowing

Annual issuance by the three largest technology borrowers approaches 220 billion dollars. Estimates for the sector as a whole run to roughly 350 billion for 2026.

Investor appetite is thinning

The ratio of bond demand to issuance fell from 3.2 to 2.5. Amazon had to offer additional yield on a 25 billion dollar sale to clear the longest-dated paper. Supply is growing faster than demand.

Risk premiums are rising

Nvidia’s five-year credit default swap premium moved from 42 to 69 basis points, the highest in the company’s history. Meta’s 12 billion dollar data centre financing priced close to sub-investment-grade levels.

The increase is in real yields

Inflation expectations have not moved on the same scale, which indicates most of the rise comes from real rates — meaning the actual cost of borrowing is higher, not merely the nominal figure.

Three Scenarios

What follows is uncertain. But uncertainty does not mean nothing can be said; the possibilities and their identifying signals can be defined.

Scenario 1 · Investment slows

If appetite continues to weaken, companies trim spending plans. Issuance falls and rate pressure eases. Signal: major technology firms revising capital expenditure guidance downward.

Scenario 2 · Borrowing continues, rates stay elevated

The investment race continues, supply keeps growing and real yields hold near current levels. Credit costs remain high through the medium term. Signal: new issues continuing to clear only with additional yield.

Scenario 3 · Sharp correction

If AI revenues visibly fall short of expectations, investment stops abruptly, risk premiums jump and credit markets tighten. Signal: a rapid widening in risk premiums and cancelled issues.

What holds in all three

Each scenario shares one conclusion: growth funded by debt now costs more than it did. That is scenario-independent and should anchor planning.

How This Reaches Turkey

Global rate movement arrives through three channels, each operating at a different speed.

Foreign currency credit cost

The fastest channel. When international benchmarks rise, FX lending prices up directly. With FX loans at 47 per cent of total lending in Turkey, that exposure is widespread.

Capital flows and the exchange rate

Higher real yields in developed markets attract capital there, creating pressure on emerging market currencies and raising imported input costs.

Investment appetite

The slowest but broadest channel. Rising global uncertainty defers investment decisions, which reduces demand for machinery, software and services.

Timing differs by channel

These do not move together. Credit costs respond in weeks, currency in months, investment appetite over quarters. Planning should account for the lag.

What to Do About It

Preparation is possible without knowing which scenario arrives. The route is to increase flexibility.

Simplify the debt structure

Knowing the share of floating-rate and foreign currency debt is the first step. Without it, no scenario can be modelled.

Split the investment

Advancing in stages rather than committing at once preserves the ability to stop if conditions change. That optionality is the most valuable feature in an uncertain rate environment.

Prioritise short payback items

Investments returning within months remain defensible regardless of scenario. Longer-dated items are not cancelled but sequenced.

Shorten the cash cycle

Reducing collection periods directly lowers the need for credit. In most businesses this is the fastest available gain.

The Digital Side

When rates rise, marketing and digital spend are usually the first items cut. Yet they include some of the shortest payback periods available.

The shortest payback category

A machine investment repays over years; conversion improvement repays over months. When capital costs more, prioritising short-return items is financially consistent — and digital sits squarely in that category.

The problem may be demand, not capacity

Most businesses planning capacity investment have not measured how much existing capacity is utilised. Growing the demand side is usually cheaper.

Measurement is the antidote to deferral

Without knowing which channel produces how many enquiries, budget cuts are made blind. With measurement in place, the item to cut becomes obvious and unnecessary cuts are avoided.

Efficiency gains are rate-independent

Automation and process improvement that let the same team handle more work require no borrowing. In digital consulting engagements this is typically the first area addressed.

A Solid Digital Foundation

When financing gets expensive, the business that survives is not the one investing most but the one operating most efficiently.

Separate fixed cost from investment

Part of digital spend is running cost, part is investment. A business that does not separate them cuts the investment believing it is overhead, and stops growing.

Technical foundation and search visibility

Site speed and technical health are the most common source of conversion gains requiring no additional budget. Google publishes its criteria in the Search Central documentation.

Extract more from existing traffic

Buying new traffic is expensive; improving conversion on existing traffic is usually an infrastructure adjustment. When rates rise, the second should take priority.

Readiness wins when the cycle turns

When rates ease, the firms that invest first hold the advantage — and that advantage goes to whoever is ready on the day. Growing through a downturn treats this as cycle-independent preparation.

Frequently Asked Questions