QTS Realty Trust, backed by Blackstone, closed a $3.9 billion five-year bond offering for a Microsoft data center project in Georgia at a 7.23% yield—approaching junk-bond territory despite investment-grade credit ratings. The bonds drew $8 billion in demand, roughly 2x oversubscription, but the tepid response compared to peer offerings signals investor caution is rising as AI infrastructure capex peaks. Demand at subscription roughly 2x the issuance, but the yield compressed only 40 basis points from initial pricing, a weak signal for a marquee borrower backed by major tech tenants on long-term leases.
This marks a sharp swing from April 2026, when QTS sold $4.6 billion of similar investment-grade debt at 5.7%—a swing of 153 basis points in five months. Per S&P Global, hyperscalers and related firms have issued $225 billion in bonds year-to-date, a 974% jump, with full-year issuance projected to reach $400 billion. Moody's flags $1.2 trillion in off-balance-sheet data-center liabilities, over $820 billion tied to facilities still under construction.
For architects: the financing math is tightening. Even with Microsoft as the long-term lessee and Blackstone equity, data center projects now command premiums typical of single-B junk debt, squeezing project returns and raising the cash-flow bar for future buildout. This is the first real signal that AI capex growth may slow not from technical constraints but from cost-of-capital constraints.