BlackRock warns AI boom could drive U.S. borrowing costs sharply higher

Investment giant BlackRock has changed its tune on long-term U.S. government bonds, saying a flood of spending on artificial intelligence could make borrowing more expensive.

The firm’s research division said Tuesday it’s now bearish on these bonds after sitting on the fence before. The outlook covers the next six to 12 months.

Here’s the issue: Tech companies are getting ready to borrow hundreds of billions of dollars to pay for AI projects. Their balance sheets look solid, but this new debt is piling on top of what the U.S. government already owes, more than $38 trillion as previously reported by Cryptopolitan.

Rising leverage creates vulnerabilities

“Higher borrowing across public and private sectors is likely to keep upward pressure on interest rates,” the BlackRock Investment Institute wrote in its 2026 outlook report.

The institute gathered views from senior investment managers at the world’s largest asset management company. They’re seeing warning signs.

“A structurally higher cost of capital raises the cost of AI-related investment and affects the broader economy,” the report said. There’s also the problem of more debt making things fragile. The system becomes vulnerable “to shocks such as bond yield spikes tied to fiscal concerns or policy tensions between managing inflation and debt servicing costs.”

AI investment still drives stock optimism

Still, BlackRock hasn’t soured on U.S. stocks. The firm thinks AI investments will keep pushing stock prices higher next year. Revenue gains from AI should lift the broader economy, though not every company will cash in equally.

“Entirely new AI-created revenue streams are likely to develop. How those revenues are shared is likely to evolve – and we don’t yet know how. Finding winners will be an active investment story,” the institute said.

The report admitted AI might eventually help government finances through better productivity and more tax money coming in. But that’s going to take time.

Major tech firms like Oracle, Meta, and Alphabet have already issued massive bond sales this year to fund AI infrastructure. The borrowing wave comes as AI spending has become a backbone of U.S. economic growth.

BlackRock also turned more negative on Japanese government bonds, pointing to higher interest rates ahead and more bonds hitting the market.

There was one bright spot. The firm warmed up to debt from developing countries, flipping to a positive view from a negative one. That’s thanks to fewer new bonds and healthier government finances in those places.

Get seen where it counts. Advertise in Cryptopolitan Research and reach crypto’s sharpest investors and builders.