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AI boom lets firms issue record zero-coupon convertibles as Nvidia backs MediaTek debt

September 2, 2026 at 07:21 EDT

Funding & M&A
Infra & Chips

Investor demand for artificial intelligence exposure is so strong that companies are selling convertible bonds that pay no regular interest — and, in many cases, no discounted yield either — even as policy rates remain elevated. The latest example is Taiwan chip designer MediaTek’s $3.9 billion zero-coupon convertible, of which Nvidia subscribed $3.5 billion and Alphabet also bought a stake.

Sept. 2, 2026 · Credit markets

AI demand is making debt interest-free

Companies are selling record volumes of zero-coupon convertible bonds. Investors skip coupons to bet on AI-linked share prices — including Nvidia’s $3.5 billion take of MediaTek’s $3.9 billion deal.

$186.8B

Global convertibles through Sept. 1 · 362 deals

60%

Share of issuance tied to the AI buildout

~$80B

Zero-coupon converts · ~43% of the total

$3.5B

Nvidia stake in MediaTek’s $3.9B 0% notes

Who is issuing — AI vs. the rest

Barclays: about 60% of this year’s convertibles are linked to hyperscalers, neoclouds, chips, and data-center energy.

60%

AI-related

40%

All other issuers

MediaTek deal: Nvidia takes almost all of it

$3.5 billion of a $3.9 billion zero-coupon convert — about nine-tenths of the offering — with Alphabet also participating.

$3.5B

Nvidia

$0.4B

Remainder

Takeaway: Nvidia is providing nearly all of the interest-free capital in this deal.

How a zero-coupon convert pays (or does not)

1. Issue at par

Sell $100 of debt for $100 — no discount yield.

→

2. Skip the coupon

0% interest while rates elsewhere stay high.

→

3. Convert or get par

Stock often needs ~40% upside; else principal back.

Issuer advantage

Cheap, long-dated growth capital. Bank of America says firms are “taking advantage” of demand, without calling it a bubble on its own.

Holder risk

If volatility fades, arbitrage buyers (about two-thirds of the market) may leave. Peloton’s 2021 zero-coupon convert preceded a stock drop of more than 95%.

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