Big tech giants are increasingly turning to public debt to fund AI-ready data centers, a shift from their traditional reliance on cash reserves. Since September, hyperscaler companies—including Alphabet, Meta, Oracle, and Amazon—have issued nearly $90 billion in bonds, with Alphabet selling $25 billion, Meta $30 billion, Oracle $18 billion, and Amazon $15 billion, according to Reuters calculations. Only Microsoft has avoided tapping the debt market in recent weeks.
So far, investor concerns about leverage remain muted because most of these firms still carry low debt relative to their size. But the sudden surge in bond issuance has sparked unease over the market’s ability to absorb the new supply and the broader implications of AI-driven capital expenditure. Analysts note that the tech sector’s rapid borrowing coincides with a recent pullback in U.S. stocks after months of gains, highlighting worries that heavy spending may weigh on valuations if AI returns fall short.
“The market woke up to the fact that it’s not going to be private credit markets or free cash flow funding AI—it’s going to come from the public bond markets,” said Brij Khurana, a portfolio manager at Wellington Management Company, speaking to Reuters. Including Meta’s $27 billion October deal with Blue Owl Capital for a new data center, hyperscaler debt issuance has surged to over $120 billion this year, compared with an average of $28 billion annually over the past five years, according to BofA Securities.
Projections suggest AI capital expenditure could reach $600 billion by 2027, up from $200 billion in 2024 and nearly $400 billion in 2025, with net debt issuance expected to hit $100 billion in 2026, according to Sage Advisory. While major tech firms ramp up borrowing, some suppliers like Nvidia have reduced long-term debt, illustrating a mixed approach to financing AI growth.
Investor appetite for tech bonds remains strong, though companies have had to pay new issue premiums of 10-15 basis points over existing debt to attract buyers. Credit spreads for U.S. investment-grade debt have ticked higher in recent weeks, reflecting concerns about the surge in supply from technology companies. Analysts at Janus Henderson said the flood of new tech bonds could “change the game” for credit markets.
Despite the borrowing surge, analysts note that debt will still constitute a small portion of total AI spending. UBS estimates that 80-90% of planned capital expenditures will come from cash flow, with leverage for top hyperscalers remaining below 1×—well within safe limits. Goldman Sachs analysts said that supply bottlenecks or investor appetite are likely to constrain near-term capital spending more than balance sheet capacity.
“These companies still have very solid business lines that are just spinning off tons of cash,” said Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions. But the unprecedented debt-fueled AI expansion underscores the growing tension between ambitious tech investment and market stability.
