U.S. companies have issued roughly $54 billion in convertible bonds so far in 2026, up 43% from the same period last year and the highest year-to-date volume since the start of the Covid-19 pandemic. The driver is clear: AI companies need massive amounts of capital to fund infrastructure buildouts and chip demand, and convertibles are proving to be one of the cheapest and most attractive ways to raise it.
Convertible bonds give investors the stability of fixed income with the upside of equity, if the stock rises to a designated price, the bond converts to shares. For AI issuers, the structure is particularly appealing. High stock prices, tight credit spreads near decade lows, and elevated volatility all make pricing favorable. CoreWeave recently issued $4 billion in convertibles at just a 1.75% interest rate. Some AI issuers are paying no interest at all.
The performance has been hard to ignore. The ICE BofA US Convertible index is up more than 20% this year, outpacing both the S&P 500 (+10%) and the Nasdaq (+13%) as of Tuesday's close.
But risks are real. The market could reverse sharply if sentiment toward AI cools, credit spreads widen, or a macro shock hits. Investors remember 2024, when crypto companies flooded the convertible market before issuance collapsed alongside crypto prices. The AI narrative is stronger, but concentration risk is building.
For fixed income investors, convertibles sit at an interesting intersection right now: bond-like downside protection in a high-rate environment, with equity upside tied to the most talked-about growth theme in markets.
Source: The Wall Street Journal, Dealogic, Bloomberg
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