The 2026 Convertible Record: AI Capex Goes Equity-Linked

Introduction

For most of its history the convertible bond was the financing tool of companies that could not get a better deal: unrated growth issuers, biotechs, and the occasional balance-sheet repair. In 2026 it became an instrument of choice for some of the largest companies in the world. Alphabet sold the biggest convertible ever, Oracle and Super Micro Computer followed with mandatory convertibles, CoreWeave came back twice, and global equity-linked issuance reached about $200 billion in the first nine months of the year, up 62 percent and a record, according to LSEG data on the third quarter.

The common thread is AI capex. This article explains why so much of the AI build-out was financed in equity-linked form, how the mandatory convertible staged its comeback at a scale the product had never seen, and what a year of rising Treasury yields did to convertible terms. It picks up where the 2024-2025 convertible boom left off; the product mechanics themselves (conversion price, premium, bond floor) are covered in convertible bond mechanics.

Every major tally points the same way. BofA Global Research counted $137.5 billion of global convertible issuance in the first half, a total larger than the full-year figure of all but six of the past 28 years, as Calamos summarised in its second-quarter review. Numerix put the second quarter alone at $84.6 billion across 96 deals, up 67 percent on the same quarter of 2025 and the largest quarter on record, with North American issuers supplying $64.2 billion of it.

The US market crossed its own line in late summer. Reuters reported in May, citing Bank of America and Barclays, that US convertible sales had reached about $34 billion in the first four months, double the prior-year pace. By early September Bloomberg data showed $131 billion of US issuance, with $25 billion in August alone pushing the year past 2025's full-year record of more than $120 billion.

The tallies differ at the margin because providers treat mandatories, exchangeables and small private deals differently, but the shape is not in doubt. What stands out is concentration. In the second quarter, 23 deals exceeded $1 billion, every one of the ten largest priced at $1.75 billion or more, and all ten were tied to AI infrastructure, semiconductors or data-center build-outs. Information technology issuers raised $34.4 billion, roughly 41 percent of the quarter, and 44 of the 96 deals carried a zero coupon.

Equity-Linked Issuance

The umbrella term for securities whose value is tied to the issuer's (or another company's) stock: convertible bonds, mandatory convertibles and convertible preferred stock, and exchangeable bonds. Equity-linked desks sit inside ECM because the investor is ultimately buying an option on the equity, but the deals share features with debt (coupons, maturities, credit analysis), so league tables and market data usually report them as a separate category from IPOs and follow-ons.

The simplest explanation is size. The hyperscalers and the "neoclouds" that rent them capacity needed more money in 2026 than any single market could supply on attractive terms, so their treasurers spread the bill across every instrument available. Convertibles were the piece that let them raise large sums without paying high-yield coupons or issuing common stock at today's price.

The Funding Gap Straight Debt Could Not Close

Oracle set the template in February. Alongside a $25 billion senior notes offering, it priced a $5 billion mandatory convertible and opened a $20 billion at-the-market program, per its prospectus supplement. Alphabet went further in June with an equity package that totalled $90 billion: $20.7 billion of common stock, the $19.3 billion mandatory, a $40 billion at-the-market program and a $10 billion private placement to Berkshire Hathaway, with proceeds earmarked for AI infrastructure and compute.

Neither company was short of bond-market access; both had sold multibillion-dollar investment-grade bond deals in 2025, as hyperscaler bonds reshaping IG issuance covers. The constraint was leverage tolerance. Rating agencies and bond investors cap how much debt a company can add before its rating moves, so each extra dollar raised through an equity-linked instrument is a dollar that does not count fully against that limit. That is the logic of the hybrid capital structure, applied at a scale nobody had tested.

Higher Yields Widened the Coupon Gap

Rising rates made the trade more attractive, not less. The 10-year Treasury yield climbed from just under 4 percent in late February to 5.31 percent on October 5, according to the Treasury's daily par yield curve, and the Fed raised its target range to 3.75-4.00 percent on September 16. Every basis point added to straight-debt costs widened the coupon saving a convertible offers, because the investor accepts a low or zero coupon in exchange for the embedded call option on the stock. For issuers with volatile, richly valued shares, that option was worth a great deal.

Investors Wanted the Exposure

Demand matched supply. Long-only convertible funds bought new AI paper as a way into the hottest part of the equity market with a bond floor underneath, and the ICE BofA US Convertible Index returned 16.78 percent in the second quarter against 15.2 percent for the S&P 500, per Numerix. Convertible arbitrage funds, which buy the bond and short the stock, had their own reason to bid: a higher short-rebate rate on the cash from their short sales improves the carry on every position. The split between outright and arbitrage buyers shapes how each book prices.

A mandatory convertible converts into common stock at a set date, usually about three years out, whatever the share price. The holder gets a dividend well above the common stock's yield and gives up some upside in return; the issuer gets money that rating agencies treat largely as equity, because conversion is certain. The structure has been around for decades (the mandatory convertible article walks through PERCS, DECS and the rating rationale), but it had never been used at anything like 2026's size.

Three deals defined the comeback:

For Alphabet, a first-time convertible issuer, the attraction was that a mandatory behaves like a forward sale of stock at a premium. The pricing announcement, filed as an exhibit to Alphabet's 8-K, shows how the economics were built.

Adding capped calls to a mandatory was itself a notable design choice. The overlay is standard on traditional convertible bonds, where it lifts the effective conversion price; on a mandatory it trims the dilution from a strong rally, up to the cap. It shows how far issuers were willing to go to keep the equity cost of AI financing visible and limited.

Size changed how the deals were run. Most convertibles are still sold the way they have been for two decades: wall-crossed with a few anchor investors, launched with a press release, marketed for hours rather than days, and priced the same day so that buyers carry stock-price risk for as short a time as possible. CoreWeave's two deals followed that model. Both were Rule 144A private offerings to qualified institutional buyers, the route that avoids SEC review and lets a deal launch and price within a day (the 144A convertible article explains why most converts are sold this way), and both were announced at $3.0 billion and upsized as orders came in.

The mandatory mega-deals ran differently: as SEC-registered underwritten offerings with marketed ranges, closer to a follow-on than a classic overnight convert. Oracle marketed its deal on a Monday with dividend talk of 6.25 to 7.25 percent and a fixed 25 percent premium, then priced that evening at 6.50 percent, near the issuer-friendly end. IFR described it as part of a $50 billion debt and equity package built to protect Oracle's Baa2/BBB/BBB ratings, with Citigroup leading the equity side and Goldman Sachs the bonds. Alphabet announced $15 billion of mandatories and $15 billion of common stock on June 1, priced both the next day, and watched the overall package grow from $80 billion announced to $90 billion once the underwriters' options were exercised, with Goldman Sachs, J.P. Morgan and Morgan Stanley as joint bookrunners.

The concurrent common stock offerings were not incidental. Buyers of mandatories and convertibles often hedge by shorting the underlying shares, and selling common stock in the same window gives that hedging demand a clean source of shares while letting the issuer raise more money at once. Super Micro likewise paired its mandatory with about $1.25 billion of common stock at $27.50 a share, and the at-the-market programs that Oracle and Alphabet opened let them keep raising equity after the headline deals closed, a reminder that the choice of follow-on product now sits in the same conversation as the convertible.

Higher rates pull convertible terms in two directions at once. A higher risk-free rate lowers the value of the bond floor, the straight-debt value beneath the option, which hurts existing holders. It also raises the value of the embedded call and widens the coupon saving versus straight debt, which supports new issuance. For a weak credit, a third force usually dominates: credit spreads widen as rates rise and the market questions how much debt the company can carry, and that pushes coupons up and conversion premiums down.

CoreWeave's two 2026 deals show the shift within one issuer. Both were upsized from $3.0 billion and both came with capped calls struck 150 percent above the share price, per the company's April pricing release and September pricing release.

In five months the coupon rose by more than a full percentage point and the premium fell by 7.5 points, against a lower share price. Investors were demanding more bond and paying less for the option, because Treasury yields were higher, CoreWeave's straight debt traded at high-yield levels, and the equity story had become more contested. The repricing kept going after the September deal: in mid-October CoreWeave's shares and bonds sold off sharply on concerns about its debt load, a reminder that a convertible issued by a highly leveraged company carries real credit risk once the stock falls far enough below the conversion price.

The mandatories tell the same story through their dividend rates. Oracle paid 6.50 percent in February, Alphabet 6.25 percent in June despite higher Treasury yields by then, and Super Micro 7.0 percent the same month. The spread between them reflects credit quality and share-price volatility more than the calendar: a mandatory holder owns the downside of the stock outright, so a stronger balance sheet and a steadier equity story buy a lower dividend, while a smaller, more volatile issuer has to pay up even in the same month.

The record was not only about the biggest names. The AI theme pulled in issuers along the whole supply chain:

Alongside new money, the market absorbed a steady flow of refinancing. Much of the 2020-2021 pandemic-era cohort, typically five- to six-year paper, falls due across 2025-2027, and issuers such as Duke Energy and Microchip Technology used new convertibles to roll it. Outside the US the market was smaller but active: EMEA issuers raised $7.3 billion and Asia-Pacific issuers $13.2 billion in the second quarter, with Lenovo among the quarter's ten largest deals worldwide.

For ECM teams the 2026 record changed where equity-linked sits in the financing conversation. The AI spenders did not choose between bonds, common stock and convertibles; they used all of them at once, sized against rating thresholds and dilution budgets. That turns the equity-linked desk into a core part of the conversation with investment-grade technology clients, not a specialist product pitched to high-yield growth names. The same coordination now runs across DCM, ECM and the corporate's treasury, because the Oracle and Alphabet packages only worked as a whole.

The risks are as concentrated as the issuance. A market in which roughly half of US issuance is tied to AI and the largest tickets come from a handful of names depends on those equity stories holding up; if AI valuations reset, many 2026 converts would trade as busted converts, valued as debt rather than equity options. The maturity wall also moves: 2026's notes and mandatories come due or convert from 2029 to 2033, setting up the next refinancing cycle. And the fall slowdown in the wider equity market, covered in where the ECM market stands, shows how quickly higher yields can change issuance windows. Whether the record holds into 2027 will depend on the next round of AI capex budgets and on where Treasury yields settle.