What’s been happening in debt markets?
The artificial intelligence (AI) boom has triggered one of the largest borrowing sprees in corporate history. US tech giants, Amazon, Alphabet, Meta, Microsoft, and Oracle, alongside AI-focused firms like CoreWeave and xAI, are issuing unprecedented volumes of debt to bankroll colossal data centre projects. Since September, Amazon, Alphabet, Meta, and Oracle have sold nearly $US90 billion in investment-grade bonds, more than they issued in the previous 40 months combined1. Meta alone raised $US30 billion in October, while Oracle tapped markets for $US18 billion in September2.
Private credit and structured deals are also proliferating. Meta’s “Hyperion” data centre in Louisiana was financed through a $US27 billion private debt package involving Pimco and Blue Owl Capital, blending project finance and corporate guarantees3. Oracle’s $US38 billion “Jacquard” construction loan for its Stargate partnership with OpenAI and SoftBank involved a syndicate of over 30 banks, an extraordinary size for project finance4.
This wave of issuance is reshaping credit markets, with Goldman Sachs estimating that tech bond sales accounted for more than a quarter of all net supply of US corporate debt this year5.
Why are tech giants turning to debt despite huge cash reserves?
Big Tech entered the AI era with enviable balance sheets. According to JPMorgan, the hyperscalers collectively hold about $US350 billion in liquid assets and are expected to generate $US725 billion in operating cash flow in 20266. Yet, the projected $US5 trillion global AI infrastructure bill dwarfs even these resources7.
The economics are stark: building hyperscale data centres requires billions upfront for chips, servers, power systems, and real estate. Companies argue that underinvesting now risks losing ground in the AI arms race. As Microsoft CFO Amy Hood put it, “we’ve been short on computing power now for many quarters. I thought we were going to catch up. We are not. Demand is increasing8.”
Debt offers flexibility, spreads risk, and taps into strong investor appetite for yield. But it also signals a structural shift: tech firms once seen as cash-rich and low-leverage are becoming capital-intensive businesses, more akin to utilities or semiconductor manufacturers.
What are markets worried about?
Markets are increasingly concerned about the implications of this borrowing spree. Rising leverage and credit risk are front of mind. Oracle epitomises investor anxiety, with its outstanding debt load surging past $US100 billion9, pushing its debt-to-equity ratio to 500% according to JPMorgan10. Credit rating agencies have warned that Oracle’s reliance on OpenAI, a loss-making startup projecting $US74 billion in operating losses by 2028, creates concentration risk. Moody’s and S&P have edged closer to downgrading Oracle’s bonds to junk status. While Meta and Alphabet remain better positioned, even they are layering on complex off-balance-sheet commitments, raising fears that if AI revenues fail to materialise quickly, these obligations could strain free cash flows.
Bond price weakness is another concern. The flood of issuance has pressured bond prices, with yields on long-dated Meta and Oracle bonds rising to now trade at premiums of 1–2% over US Treasuries. If interest rates increase or remain elevated for longer than expected, refinancing costs could rise, putting further pressure on free cash flows. Credit-default swap spreads for Oracle have more than doubled since September, reflecting rising hedging costs and investor concerns about Oracle’s debt load.
Systemic risks and market saturation are also in focus. AI-related bonds already account for nearly 9% of all US investment-grade issuance this year11. Analysts warn that if hundreds of billions in debt are tied to assets with uncertain returns, or to technologies that could become obsolete, the risk could ripple through credit markets.
Finally, there are physical constraints. Shortages of transformers, turbines, and skilled labour are already delaying projects, and even with aggressive investment, global data centre capacity may not expand as quickly as planned. If infrastructure growth lags behind expectations, revenue forecasts tied to AI services could come under pressure.
How could this impact investors and the US economy?
AI spending has become a pillar of US economic growth, contributing up to half of GDP growth in the first half of 2025 according to Barclays12, underscoring the scale of investment by America’s tech giants.
For bond investors, the challenge is navigating a market where traditional investment-grade debt increasingly carries project-finance-like risks. While AI undoubtedly offers a transformative opportunity for tech giants, the risks are real. If revenue growth falls short or materialises later than anticipated, and interest rates remain elevated, free cash flows could come under pressure. In that scenario, refinancing these mega-projects may prove costly, as investors demand higher premiums to compensate for heightened uncertainty.
References
- The Wall Street Journal, “Flood of AI bonds adds to pressure on markets,” 23 November 2025
- The Wall Street Journal, “AI is making big tech weaker,” 16 November 2025
- The Wall Street Journal, “Wall Street blows past bubble worries to supercharge AI spending frenzy,” 16 November 2025
- The Wall Street Journal, “Three AI megadeals are breaking new ground on Wall Street,” 11 November 2025
- Financial Times, “Amazon joints Big Tech bond rush with $12bn debt sale,” 18 November 2025
- Financial Times, “Investor angst over Big Tech’s AI spending spills into bond market,” 11 November 2025
- The Wall Street Journal, “When AI hype meets AI reality: A reckoning in 6 charts,” 14 November 2025
- The Wall Street Journal, “Big Tech is spending more than ever on AI and it’s still not enough,” 30 October 2025
- The Wall Street Journal, “Oracle was an AI darling on Wall Street. Then reality set in,” 19 November 2025
- Financial Times, “Oracle hit hard in Wall Street’s tech sell-off over its huge AI bet,” 15 November 2025
- The Wall Street Journal, “The AI boom is looking more and more fragile,” 12 November 2025
- The Wall Street Journal, “How the US economy became hooked on AI spending,” 24 November 2025