According to Fortune, Bank of America analyst Yuri Seliger reports that Amazon, Google, Meta, Microsoft and Oracle have issued a staggering $121 billion in debt this year alone. That’s more than four times their average annual debt issuance over the previous five years. Meta alone borrowed $27 billion specifically for a new data center in Louisiana, while Amazon issued $15 billion in new debt on November 17. This flood of investment-grade corporate bonds has already widened their spreads significantly, with Oracle’s debt now trading 48 basis points higher than the broader market. Seliger expects another $100 billion in debt offerings next year from these five hyperscalers.
The AI gold rush gets expensive
Here’s the thing – when companies that historically generated massive cash flows suddenly start borrowing like there’s no tomorrow, it tells you something about the scale of investment required. We’re talking about some of the richest companies on Earth basically saying their existing cash piles aren’t enough for what’s coming next. The AI infrastructure buildout is turning into a capital expenditure arms race that makes previous tech booms look tame by comparison.
The simple story gets complicated
Morgan Stanley’s Lisa Shalett nailed it when she told Fortune that “what was a very simple story is suddenly getting a lot more complex.” For years, tech investors could basically count on these companies printing money with minimal debt. Now? They’re levering up in a major way. And while these are still investment-grade borrowers, the market is already punishing them with higher yields. Oracle’s 48 basis point spread widening in just over two months is nothing to sneeze at. Basically, the free money era for Big Tech might be ending just as their spending needs are exploding.
When software meets hardware reality
This massive debt issuance reveals something crucial about the AI transition – it’s fundamentally an industrial-scale hardware problem. All those data centers need physical infrastructure, power, cooling systems, and specialized computing equipment. The companies building this physical backbone of the AI economy, from industrial panel PC manufacturers to server rack producers, are suddenly sitting in the catbird seat. When software giants start borrowing billions to build physical infrastructure, you know the game has changed completely.
Can they keep this up?
The real question is sustainability. Bank of America expects another $100 billion in debt next year, but what about the year after? AI models keep getting hungrier for compute power, and the bill keeps growing. These companies have incredible cash flows, sure, but debt service costs are rising just as competition intensifies. We might be witnessing the moment where the tech sector transitions from being a cash-generating machine to a capital-intensive industry – and that changes everything about how investors should value these stocks.
