Data centers run on debt. That was a problem for bonds this year — and it’s only going to get worse.

The buildout of data centers powering artificial intelligence has been financed heavily through debt, and that wave of issuance weighed on bond portfolios this year. According to the source summary, AI-related debt issuance overwhelmed investor portfolios and disappointed from a performance perspective — meaning the bonds did not deliver the returns holders might have expected given the scale of the borrowing.

The key takeaway for market watchers is one of supply and demand. When a single sector issues debt at a rapid pace, the market must absorb it, and that can pressure pricing and performance across related credit. The summary also notes that the funding need is unlikely to ease, with the political backdrop — Democrats in control of Congress — cited as a factor that won't improve the situation.

What to watch: the pace of future AI-related issuance, how investors absorb it, and whether performance continues to lag. For bondholders, the story is less about any single company and more about how a large, sustained borrowing cycle ripples through credit markets.