Sector Insights: Tech Hardware & AI Infrastructure Quarterly Q1’26: Non-IG AI Infrastructure Debt Swells Past $125B; Neocloud, DC Bonds Trade Wide to Index While Other Hardware Trade Through Median

Relevant Items:
Link to AI Infrastructure Database on the Analysis Page
AI Infrastructure Overview (May)
Data Center Supply-Chain Subsector Q1’26
SanDisk Earnings Analysis, Q3’26
Seagate Technology Earnings Analysis, Q3’26
Western Digital Earnings Analysis, Q3’26
Super Micro Computers Earnings Analysis, Q3 FY’26
Amkor Technology Earnings Analysis Q1’26
ON Semiconductor Earnings Analysis Q1’26
Entegris Earnings Analysis Q1’26
 

• The AI Infrastructure database grew by over $17 billion in under two months to $125 billion, driven by CoreWeave, Iren and four new U.S. data center SPV bonds.
   
• CoreWeave’s unsecured curve trades at roughly 620 bps OAS, more than double the ICE BofA single-B HY index’s 292 bps, while data center secured bonds also trade wide to the BB index, bifurcated by tenant credit quality.
   
• By contrast, most double-B hardware and equipment names trade near or tighter than the cohort’s 5.36% median yield, reflecting the relative value gap between AI infrastructure and other hardware credits.
   
• Hardware and equipment names posted broad revenue and margin strength with leverage across the sector continuing to trend lower, though Amkor is levering up to fund its Arizona capacity buildout.
   
• Capital markets stayed active with ON Semi’s $7 billion Synaptics acquisition, Amkor’s upsized convertible notes, and several neocloud and data center SPV bond deals, while Elk Grove’s proposed bond was pulled on weak demand.

We have updated, through the end of June, our AI Infrastructure Database, originally published along with our deep dive into this emergent sector. This analyst-curated dataset of debt issued by non-investment-grade neoclouds and data center operators has grown by over $17 billion in less than two months, to $125 billion from $107 billion. The notable additions include:
 

• The $3 billion of convertible notes issued by Iren Ltd. in May;
• The $3.65 billion GPU-backed financing package announced by Iren on June 1;
  • Like CoreWeave’s delayed-draw term loan 4.0, this financing received an investment-grade rating from Fitch Ratings and DBRS due to the strength of the contract counterparty (in this case, Microsoft).
• The $1.6 billion in customer prepayment received by Iren to fund the same Microsoft contract;
• CoreWeave’s $3.5 billion-equivalent cross-border offering priced in June;
• The €750 million secured floating-rate note issued by HIG-owned PolarDC in the Nordic market, analyzed in more detail by our EMEA colleagues, and
• Four new U.S. data center special purpose vehicle, or SPV, bonds, described in more detail further in this piece.

Overall, composition of this sub-segment of the market has not changed meaningfully, with neoclouds, particularly CoreWeave, continuing to dominate the overall issuance.
 

The instrument type breakdown has also stayed similar to our snapshot as of mid-May.
 

The corporate bond market saw $7.3 billion-equivalent issuance for the full month of May (including the $3 billion Iren convertible), while June came in at $8.5 billion.
 

Hardware and Equipment Companies
 

We believe that, fundamentally, Ciena is best positioned to exhibit low spread volatility compared with its equipment peers. As a direct beneficiary of the data center upcycle, the company reported a record $7.7 billion backlog, 80% of the hardware portion of which it expects to realize over the next 12 months, alongside the lowest net leverage in its peer group. This positioning is partially offset by client concentration risk, as just two cloud customers constitute roughly one-third of its revenues. Meanwhile, though TTM Technologies’ credit remains resilient due to a strong top-line beat and low leverage, its free cash flow may face pressure as it steps up capital expenditure in 2026 and 2027. The company upsized its revolver to $1 billion (from roughly $300 million) and repriced its term loan likely to fund this rising capex, prompting S&P Global Ratings to downgrade its senior unsecured notes to B+.

Zebra Technologies’ first-quarter rebound was driven by a combination of inorganic contribution from Elo Touch, a recovery in North America, higher pricing, margin-enhancing productivity actions and secular demand tailwinds in automation and AI. The company noted the resilience of the manufacturing sector and highlighted an inflection point for its machine vision business. Furthermore, memory-driven cost inflation is already a confirmed, quantified headwind to margins, though management plans to offset this via pricing. That said, Zebra’s end-market demand could face indirect pressure, if enterprise customers reprioritize budgets toward data center hardware, frontline device spend could get squeezed. While management dismissed this risk at a recent conference, IBM’s commentary suggests this capex reprioritization dynamic is already playing out among enterprise clients.

We reiterate that spreads on unsecured notes for Amkor Technology may exhibit higher volatility relative to its peer group during a consumer electronics downturn. The combination of downstream assembly exposure and an elevated capex cycle risks creating a highly leveraged, cyclical stress scenario.

Conversely, we believe Coherent Corp.’s senior notes will experience less spread widening compared to semiconductor peers. Approximately 70% of Coherent’s revenue is derived from high-growth data center and communications segments, which feature an improving margin profile. The company has reduced net leverage to 1x from 4x (including preference shares in debt) over the last four quarters.

Data Centers and Neoclouds
 

The AI infrastructure universe continues to trade wide to its ratings, with bonds coming off their local highs over the past month. B-rated CoreWeave’s unsecured curve trades at a weighted average option-adjusted spread, or OAS, of approximately 620 bps as of mid-July, with yields on all bonds back in the double digits and prices below par at the midpoint. The ICE BofA single-B high yield index is trading at a weighted average OAS of 292 bps, for comparison. CoreWeave remains the only straight high-yield corporate bond issuer not only within the neocloud space but within the broader AI infrastructure subsector, with Elk Grove recently pulling its proposed corporate-level Nordic bond amid lackluster investor demand.

The data center secured bond universe, which continues to carry BB ratings on average, also continues to trade wide to the BB index. As shown in the table above, the market appears to be bifurcating similarly rated bonds by tenant risk, with bonds exposed to investment-grade counterparties trading at a weighted average OAS of 226 bps and bonds exposed to non-investment-grade tenant risk (largely CoreWeave) trading at a weighted average OAS of 389 bps.
 

The subsector article examines the evolving supply-chain dynamics across AI infrastructure, focusing on sectors such as data storage, networking and power electronics. Networking companies are planning significant capital expenditures through 2028, funded by free cash flows and customer agreements rather than debt. Companies such as Vertiv and Eaton are shifting toward integrated AI-optimized data center solutions through acquisitions, while Dell, HPE and Super Micro are experiencing rapid growth in AI server revenues despite margin pressures from GPU supply constraints and memory cost inflation. SanDisk’s impressive revenue growth and gross margin highlight the strong pricing environment in NAND, with long-term agreements insulating the data storage sector.
 

Quarters within data sets are aligned according to calendar-year quarters for seamless comparison.
 

Hyperscalers and cloud service providers accelerating data center capacity build-outs lifted both HDD (Seagate, Western Digital) and NAND flash (SanDisk) demand simultaneously, contributing to strong pricing power and margin expansion across the board. TTM Technologies’ 30% reported growth substantially outpaced Zebra’s 14.3% (4.3% organic). TTM’s acceleration was driven by AI-related data center demand and defense spending, while Zebra’s growth, though broad-based, was partially constrained by memory supply limitations that management expects to navigate through the rest of the year.

Ciena raised its full fiscal 2026 revenue guidance to $6.3 billion (plus or minus $100 million), implying 32% year-over-year growth at the midpoint, the second consecutive guidance raise for the year. Viavi’s growth reflects both the Spirent acquisition and strong organic demand for test and measurement equipment across the data center value chain, with an accelerating contribution from aerospace and defense. It does not expect a near-term wireless recovery but highlighted early-cycle 6G and AI-RAN investment as a future tailwind.

Within semiconductor space, Amkor’s AI advanced packaging is on track to triple in 2026, though materials supply, not demand, is the binding constraint, resulting in revenue deferring an estimated $50 million to $100 million per quarter. Entegris delivered solid unit-driven growth (plus 7% year over year) led by a record liquid filtration quarter, though capex-driven revenue was temporarily depressed by tariff-related pull-ins in the year-ago period, a distortion the company expects to reverse in the second half of 2026, with the broader fab build-out outlook nearly doubling since February.

Coherent was the standout for forward visibility, with record backlog, orders extending into calendar 2028, data center revenue up 37% year over year and communications up 60% year over year, while management guided fiscal 2027 growth to exceed fiscal 2026, underpinned by a six-inch indium phosphide capacity ramp tracking one quarter ahead of schedule. ON Semiconductor marked its own inflection, with AI data center growing more than 30% sequentially and doubling year over year, while automotive returned to year-over-year growth after seven consecutive quarters of decline.
 

Leverage within this space has remained stable and companies are on a steady deleveraging path, operating in strong cash and liquidity positions having low net leverages.

Entegris executed a steady and deliberate deleveraging from 4x in the first quarter of 2025 to 3.6x in the first quarter of 2026. It updated its leverage target downward in the first quarter to “approximately 3x by year-end 2026” from 3.5x. Viavi paused its share buyback program explicitly to free up capital for debt management. The company repaid debt of $49 million toward the remaining principal of convertible notes due in March 2026 and prepaid $150 million of its term loan B, reducing that balance to $450 million. It issued equity in May to repay the balance of the term loan.

As highlighted in our semiconductor analysis, Amkor Technology is levering up in 2026 to fund its Arizona facility and High-Density Fan-Out capacity expansion. Although management indicated that this capex is supported by government incentives and customer commitments, these incentives will likely lag the front-loaded expenditures. Furthermore, any deterioration in consumer-oriented segments, driven by limited chip availability or weakening demand in response to higher prices, may exert additional pressure on the credit profile.
 

• ON Semiconductor Corp. announced its acquisition of Synaptics in an all-stock transaction valued at approximately $7 billion. The deal involves a fixed exchange ratio of 1.35 Onsemi shares for each Synaptics share, offering a 19% premium over their recent average closing prices. It also priced a $1.3 billion of 0% convertible senior notes due 2031, with an initial conversion price of about $161.30 per share, a 52.5% premium to the closing price of its common stock of $105.77 per share on the pricing date.
   
• Elk Grove Village, an intermediate holding company owned by Prime Data Centers that holds equity of a number of data center SPVs, attempted issuing a $600 million, four-year senior secured bond to finance project capex (including future Prime-affiliated projects) and a debt service reserve account with an initial price talk at low 9%. The proposed structure included first priority security over share pledges, the DSRA and project loans to other Prime projects, with a borrowing limit of $1 billion. The bond faced challenges including investor concerns over the company’s leveraged HoldCo structure and reliance on CoreWeave as a major tenant. We highlighted some of the structural issues with these notes, including the high implied loan-to-cost attachment point and the low expected debt service coverage. Despite widening the price talk to high-9% area, the deal was ultimately pulled amid lackluster investor demand.
   
• Powered shell data center operator Yondr priced $715 million of 6.875% senior secured notes maturing in 2031. The issuer said it intends to use the net proceeds from the offering to (i) finance a portion of the project’s construction on the property; (ii) fund the debt service reserve account; and (iii) pay transaction fees and expenses in connection with the offering. The data center will be leased to an unnamed investment-grade hyperscaler. Octus reported on the deal HERE.
   
• Qnity launched the repricing of its existing $2.338 billion TLB due October 2032 at SOFR+175 bps, inside of the existing facility’s interest rate of SOFR+200 bps. Commitments were due June 22, at 5 p.m. ET.
   
• Belden priced its $1.85 billion TLB due 2033 at SOFR+225 bps with an OID of 99.75 on June 11. Pricing tightened from initial price talk of SOFR+250-270 bps with an OID of 99.5. Proceeds are expected to be used to finance the acquisition of Ruckus networks.
   
• Cipher Digital priced an $810 million offering of SSNs due in 2031 at 6%, issued through its subsidiary Stingray Compute LLC. The proceeds will finance the construction of its 70-megawatt Stingray HPC data center in Texas, reimburse prior equity contributions and fund a debt service reserve. The data center will be leased to Amazon.
   
• Applied Digital priced a $1.59 billion offering of SSNs maturing in 2031 at 7%, issued via its subsidiary APLD ComputeCo 3 LLC. The proceeds will be used to fund construction of the ELN-04 project, refinance an outstanding bridge loan and establish required transaction reserves. The data center will be leased to CoreWeave.
   
• Super Micro Computer announced a $7 billion capital raise through a series of equity and equity-linked financing transactions to fund component purchases necessary to meet a surge in orders for advanced AI servers.
   
• CoreWeave announced an offering of $3.5 billion in SUNs, split between U.S. dollar- and euro-denominated tranches that both mature in 2032. The company intends to use the proceeds to support general corporate purposes, repayment of debt and to pay expenses in connection with this offering. It priced $1.25 billion of senior notes due 2032 at 9.625% and €2 billion of senior notes due 2032 at 8.5%.
   
• Elk Grove Village Property, a data center SPV owned by Prime Data Centers, issued $900 million, upsized from $850 million, of SSNs due 2031, with proceeds expected to be used to repay existing debt, finance remaining data center construction, fund debt service reserves, fund a distribution and pay related fees. The Ba3/BB-/BB- notes had initial price whispers in the high 7% area and ultimately priced at 7.5% on June 2.
   
• Amkor Technology issued an upsized $1.15 billion of 0% convertible senior notes due 2031 as initial purchasers of the notes chose to fully exercise their option to purchase an additional $150 million of notes.
   

• Moody’s assigned a Ba3 corporate family rating to Yondr JK 1 LLC and its $715 million SSNs, with a stable outlook. The proceeds from the notes will fund the construction of a 48 MW data center in northern Virginia, leased to a subsidiary of an investment-grade hyperscaler for 15 years. Fitch assigned an expected BB(EXP) long-term issuer default rating and senior secured debt rating.
   
• Moody’s assigned a B1 rating and S&P assigned a B rating to CoreWeave’s proposed U.S. dollar and euro SUNs due 2032. CoreWeave plans to use the proceeds from these notes for general corporate purposes, including capital expenditures and debt repayment. According to Moody’s, despite high financial leverage, the company’s strong revenue growth is supported by a substantial contracted revenue backlog and strategic partnerships.
   
• Moody’s assigned a Ba2 to Stingray Compute LLC’s $810 million SSNs, which will fund a data center in Andrews, Texas, leased to Amazon Web Services under a long-term agreement. Fitch Ratings has assigned APLD ComputeCo 3 LLC’s $1.59 billion SSNs a rating of BB-, with a positive outlook. The rating reflects the project’s contracted revenue profile, supported by a 15-year lease with CoreWeave and sufficient cash flows to repay the debt during the initial lease term. S&P assigned a BB- rating to the notes with a positive outlook, citing risks such as CoreWeave’s speculative-grade rating and the facility’s location outside top-tier markets.
   
• Moody’s upgraded Viavi Solutions Inc. to Ba2 from Ba3, with a positive outlook, after an underwritten equity offering generated approximately $575 million in gross proceeds that will be used to repay its $450 million term loan. The SUNs were upgraded two notches to Ba2, reflecting their improved position in the capital structure following term loan repayment.
   
• S&P lowered its issue-level rating on TTM Technologies’ unsecured notes to B+ from BB- following the company’s announcement of a new $1 billion secured revolver.
   
• S&P upgraded SanDisk’s ratings to BB+ after the company repaid all its debt, moving into a net cash position. According to S&P, SanDisk is expected to benefit from favorable market conditions through fiscal 2027, driven by strong demand in the NAND market and data centers, which is projected to lead to significant revenue and cash flow growth.
   
• S&P raised its issue-level rating on Ultra Clean Holdings’ revolver to BB from BB-, after the repayment of its first lien term loan, as it enhanced recovery prospects for the revolving credit facility.