The era of unchecked enthusiasm for AI-related stocks may be cooling as major technology companies, including Google, Meta, Microsoft, and Amazon, load up on debt to finance their ambitious artificial intelligence infrastructure projects. These firms have committed hundreds of billions of dollars to build the data centers and computing power needed to lead in AI, but the market is beginning to question the sustainability of such heavy borrowing.
According to a recent report from Moody's Ratings, the leading hyperscalers—Amazon, CoreWeave, Google, Meta, Microsoft, and Oracle—are projected to spend $785 billion on infrastructure this year, with that figure expected to approach $1 trillion by 2027. Despite being among the most cash-rich companies in history, these firms have accumulated roughly $460 billion in debt to support their AI spending, a move Moody's warns could "threaten credit quality."
The shift in balance sheets is stark. Bond issuance from these companies has exploded from $16.7 billion in 2024 to a staggering $193 billion so far in 2026, according to LSEG data. This surge in debt has caught the attention of Wall Street, with credit default swaps (CDS) on major tech names ticking upward. Oracle, for instance, saw its five-year CDS jump to 218 basis points last Wednesday, reflecting a higher perceived risk of default.
"I'm not shocked that Big Tech companies are coming out and tapping equity and debt markets," said Callie Cox, chief market strategist at Ritholtz Wealth Management. "It was assumed as much when they started ramping their spending up and started talking about these audacious AI strategies. What is surprising is the magnitude of the spending and the amount of fundraising that these companies have leaned on the stock and debt markets for."
The market's anxiety is showing up in bond spreads. S&P Global analysts noted that "hyperscaler spreads have been widening quickly with each new debt infusion since last fall—even Microsoft is seeing wider spreads over this period despite not issuing new debt." They added that "market participants are growing leery of quickly rising leverage from issuers previously characterized by strong and reliable cash flow."
This growing caution comes as investors weigh the potential returns on AI investments against the escalating costs. Google's stock took a hit after its second-quarter earnings revealed that free cash flow turned negative for the first time since going public, even as the company raised its spending forecast by $15 billion. Meta's shares also dipped after the company increased its 2026 spending forecast by $5 billion and reported a sharp drop in free cash flow to about $780 million.
Microsoft, however, bucked the trend, adding nearly $450 billion in market value after reporting that it would hold spending steady and keep free cash flow positive through fiscal year 2027. Amazon also saw its stock rise despite announcing another $20 billion in capital expenditures and negative cash flow, thanks to stronger-than-expected revenue. Apple, which has largely sat out the AI spending boom, has become something of a counterweight to the hyperscalers, with Cox noting a "push and pull between financial quality and nimbleness around AI."
The broader market has been volatile, with a tech sell-off last week driven by AI spending fears and competition from China. Yet stocks rebounded Tuesday, with the S&P 500 and Dow Jones Industrial Average closing at new highs. Still, the mounting debt load of the biggest AI players is a trend that bears close watching, especially as the strain on the U.S. power grid and other infrastructure challenges could further complicate the AI buildout.
As investors reassess the risks, the question remains whether the massive investments in AI will deliver the promised returns. For now, the market's enthusiasm is tempered by the reality of rising leverage and the potential for a reckoning if the technology fails to meet expectations.
