High yield’s AI era: Assessing the data center buildout

August 18, 2026

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The rapid growth of data-center issuance is reshaping the US high yield market. While echoes of previous investment cycles remain, contracted cashflows and stronger counterparties are creating opportunities for investors able to navigate construction and credit risk.

Over the last 18 months, a new segment of issuer has emerged within the high yield wireline sector: the data center. Eighteen data-center issuers now account for approximately 3.5% of the high yield market,¹ and issuance is expected to continue to grow. Some estimates suggest data-center issuers will account for nearly 10% of the market by 2030.²

Today’s US high yield market is highly diversified, with nearly 800 issuers spread across more than 1,800 bond issues and over 30 sectors.¹ History shows, however, how quickly that composition can change when a secular investment cycle drives heavy borrowing within a particular industry.

In the early 2000s, ahead of the bursting of the tech bubble, wireline companies accounted for nearly 20% of the market. When the anticipated revenues failed to materialise, the sector experienced a spike in defaults. More recently, in the mid-2010s, oil and gas producers accounted for nearly 10% of the high yield market. When oil prices subsequently fell, defaults again rose sharply.

A fundamentally different cycle

We are selective, not indiscriminate

However, as an active manager, we do not blindly invest in every datacenter bond to come to market. Two things drive our selection: how close construction is to completion, and who the tenant is. Both speak directly to the risks in this space:

Where the risk sits – and how we position

How we position across the risk spectrum

We genuinely believe this cycle differs from the early-2000s tech bubble: credit quality is stronger and cashflows contracted. In the early 2000s there was a “build it and they will come” mentality, which was speculative in nature. Today, the high yield investments we are adding to our portfolios have contracted counterparties – often companies with very strong balance sheets and cash flows.

As with any investment cycle, risks need to be managed, so we continue to apply our bottom-up, research-driven approach to portfolio construction.

References

1  ICE Index Platform, as of 7 August 2026, ICE BofA US Cash Pay High Yield Index (J0A0).
2  Source: Barclays Research, as of 8th July 2026.

 

This material is not intended to be relied upon as a forecast, research, or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed by Muzinich & Co. are as of August 2026 and may change without notice.

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Index descriptions

J0A0 - The ICE BofA US Cash Pay High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt, currently in a coupon paying period that is publicly issued in the US domestic market.  Qualifying securities must have a below investment grade rating (based on an average of Moody’s, S&P and Fitch), at least 18 months to final maturity at the time of issuance, at least one year remaining term to final maturity as of the rebalancing date, a fixed coupon schedule and a minimum amount outstanding of US$250 million.

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