AI Buildout Pushes Tech Giants Deeper Into Debt
Morgan Stanley expects AI-related debt issuance to reach $570 billion in 2026 as hyperscalers rely more on bonds and loans to fund data centers, chips and computing infrastructure.
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Image Credit- Chetan Jha/ MIT Sloan Management Review India
The artificial intelligence boom is forcing the world’s largest technology companies to lean harder on debt markets as the cost of data centers, chips and computing infrastructure climbs.
Morgan Stanley expects AI-related debt issuance to more than double to about $570 billion in 2026, Reuters reported, as hyperscalers turn to bonds and loans to fund the sector’s biggest investment cycle in years.
The bank said AI-related debt issuance had reached nearly $236 billion by 31 May, roughly four times the level seen during the same period a year ago. It expects issuance to accelerate in the second half of the year as capital spending commitments continue to rise.
The shift marks a change for companies that have traditionally funded expansion largely through cash flow. Amazon, Alphabet, Microsoft, Meta and Oracle are now using credit markets more heavily as they race to secure computing capacity for AI models and cloud customers.
At the center of the spending wave are hyperscalers, the large cloud and technology companies building the data centers that support AI services. Morgan Stanley estimates that hyperscalers will spend about $700 billion this year and sees combined capital expenditure crossing $1 trillion in 2027.
The scale of those investments is forcing companies to widen their funding sources.
“Hyperscalers have been broadening their investor base through non-USD issuance,” Morgan Stanley said in a note, cited by Reuters. The bank said bond market performance was being driven less by weaker fundamentals and more by expectations of heavier debt supply.
Recent funding moves show how quickly that shift is playing out.
Oracle said this week that its remaining performance obligations rose to $638 billion in the fourth quarter, driven by demand for cloud infrastructure. The company reported quarterly cloud infrastructure revenue of $5.8 billion, up 93% from a year ago, and total cloud revenue of $9.9 billion.
But the growth comes with a much larger funding burden. Oracle expects fiscal 2027 capital expenditure to reach as much as $95 billion, above Wall Street estimates, as it expands AI and cloud infrastructure.
The company also plans to raise nearly $40 billion through debt and equity financing in fiscal 2027, including a previously announced $20 billion at-the-market equity program.
Oracle has become a useful example of the trade-off facing the sector. Its cloud backlog has surged, but the upfront cost of building capacity has increased pressure on free cash flow and raised investor concern over debt.
Amazon has also moved quickly to secure financing. The company entered into a $17.5 billion senior unsecured delayed-draw term loan facility on 8 June, according to a US Securities and Exchange Commission filing.
The facility allows Amazon to draw funds as needed until 30 September, with any borrowed amount maturing three years from the date of borrowing. The proceeds will be used for general corporate purposes.
Amazon also issued C$14 billion in Canadian dollar-denominated bonds this week, Reuters reported, setting a record for the Canadian corporate bond market. That followed a €14.5 billion euro bond deal in March, also reported as a record for the euro corporate bond market.
The Amazon deals underline a broader trend identified by Morgan Stanley: large US technology firms are borrowing outside the dollar market to diversify funding and tap investor demand for high-grade AI exposure.
Alphabet and Meta have also used debt markets as AI spending rises. Google’s parent tapped the euro bond market in May after a large multi-currency debt raise earlier in the year. Meta filed in October for what was its largest bond offering, of up to $30 billion.
Technology companies argue that the investments are necessary to remain competitive as customers shift more workloads to AI and cloud platforms. Bond investors, for now, seem still willing to finance that buildout, especially for companies with strong balance sheets and high credit ratings.
