AI Investment Frenzy: Tech Giants Like Alphabet See Debt Levels Double

Odaily reported that global tech giants aggressively building AI data centers have doubled their debt over the past five years. To support an unprecedented capital expenditure boom, these companies have turned to debt financing, viewing it as necessary to drive economic transformation. According to data compiled by Bloomberg, the five largest data center investors in the US — Alphabet Inc., Amazon, Meta Platforms Inc., Microsoft, and Oracle — have collectively added approximately $350 billion in debt over the past five years. These companies are betting that frontier AI services will eventually generate substantial new revenue. Investors have been enthusiastic about these firms, actively subscribing to bonds issued in various currencies.

However, according to sources familiar with the matter, Amazon's $25 billion bond issuance this week encountered unusual cold feet, indicating that the capital market's capacity to absorb continuous financing from tech giants for AI investment is not unlimited. Still, for most of these highly profitable companies, the cost of borrowing remains relatively limited. The combined interest expenses of these five companies exceeded $10 billion last year, more than doubling from 2019, but this amount remains insignificant compared to the free cash flow of any one of them.

Take Google for example. As of the end of March, its free cash flow — operating cash flow minus capital expenditure — reached $64 billion. However, not all companies are in equally sound financial health. Amazon's free cash flow turned negative in the quarter ending March 31; Oracle's cash burn is expected to accelerate further, with its debt in 2025 projected to be about 2.5 times its annual sales. On Thursday, S&P downgraded Oracle's credit rating to the lowest tier of investment grade, citing the company's continuously expanding AI investment spending. (CLS)