Amid the AI investment frenzy, the debt scale of tech giants such as Alphabet has doubled

According to Odaily, global tech giants building AI data centers have doubled their debt levels over the past five years. To support an unprecedented surge in capital expenditures, these companies are borrowing heavily, considering it essential for driving economic transformation. Data compiled by Bloomberg shows that the five US companies with the largest investments in data centers—Alphabet Inc., Amazon, Meta Platforms Inc., Microsoft, and Oracle—have collectively added about $350 billion in new debt over the past five years. These companies are betting that cutting-edge AI services will eventually generate substantial new revenue. Investors have previously shown strong enthusiasm for these firms, actively subscribing to various types of bonds issued by them.

However, according to sources familiar with the matter, Amazon’s $25 billion bond issuance this week encountered an unusually lukewarm response, indicating that the capital market’s capacity to sustain ongoing AI-related fundraising by tech giants is not unlimited. Nevertheless, for most of these highly profitable companies, current borrowing costs remain relatively low. Last year, the combined interest expenses of these five firms exceeded $10 billion—more than double the amount in 2019—but this still appears negligible compared to the free cash flow of just one of these companies.

Take Google as an example: as of the end of March, its free cash flow after deducting capital expenditures from operating cash flow was $64 billion. However, not all firms are as financially robust. At Amazon, free cash flow for the quarter ending March 31 turned negative; at Oracle, cash burn is expected to accelerate further, with its 2025 debt projected to be about 2.5 times its annual sales. S&P on Thursday downgraded Oracle’s credit rating to the lowest tier of investment grade, citing the company’s continuously rising spending on AI investments. (CLS)