US EditionJitters over AI spending set to grow as US tech giants flood bond market
Hyperscalers have issued over $120 billion in bonds this year to fund AI data centers as AI capital expenditure could reach $600 billion by 2027, analysts say.
- Since September, four hyperscalers have sold nearly $90 billion in bonds—Alphabet $25 billion, Meta $30 billion, Oracle $18 billion, and Amazon $15 billion—while Microsoft has not tapped the market in recent weeks.
- To finance soaring AI capex, hyperscalers are borrowing as AI capital expenditure is projected to rise to $600 billion by 2027, with about 80-90% still from cash, Sage Advisory said recently.
- Alphabet and Meta paid about 10-15 basis points to place bonds, investors demanded sizeable new-issue premiums, and U.S. investment-grade credit spreads ticked up in recent weeks, Janus Henderson said.
- Investors are growing uneasy that AI-related debt could strain the U.S. corporate bond market and dampen tech stocks, as Larry Hatheway noted `there are doubts that have emerged in the last few weeks around the AI spend story`.
- Including Meta's $27 billion Blue Owl deal, hyperscaler issuance has surged to over $120 billion this year, and Brij Khurana said, `You have all these hyperscaler issuance coming out... it’s going to have to come from the public bond markets`.
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Jitters over AI spending set to grow as US tech giants flood bond market
Investors are growing uneasy that the rapid rise in public debt used to bankroll AI investments could strain the U.S. corporate bond market and eventually dampen the appeal of tech stocks, despite leverage across most major companies remaining low for now.
Jitters over AI spending set to grow as U.S. tech giants flood bond market
Investors are growing uneasy that the rapid rise in public debt used to bankroll AI investments could strain the U.S. corporate bond market and eventually dampen the appeal of tech stocks, despite leverage across most major companies remaining low for now.
As the global stock markets and the S&P 500 look increasingly nervously at the aggressive AI investments of the tech giants, the pressure on their balance sheets is growing noticeably. The sector, long driven by record profits and luxuriant cash reserves, is now increasingly resorting to debt – a strategy change that visibly increases the risk. Oracle in particular stands [...] The post debt avalanche at Big Tech: What this means for AI stocks a…
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