AI Capex and the Limits of Crowding Out

Published on September 22, 2026

A popular narrative for the rise in bond yields over the past few months is that the debt-funded AI capital expenditure cycle is crowding out the Treasury market. The crowding-out argument can appear compelling: AI companies are expected to continue to issue unprecedented amounts of debt at a time when Treasury supply remains elevated. Because both ultimately draw from the same pool of investor capital, yields must rise to clear the market.

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