Big Tech is borrowing like never before

6 hours ago

Big Tech's AI expansion is shifting from using cash flow to relying on bond markets, with companies like Nvidia issuing large debt despite strong balance sheets.
AI-linked global debt issuance is projected to grow significantly, reaching nearly $570 billion by 2026, as major tech firms finance costly data center builds.
Companies such as Meta, Oracle, Alphabet, and Amazon are tapping bond markets, indicating a move away from cash-rich models toward leverage for AI capacity.
Kevin Warsh's first Fed meeting adopted a hawkish tone, reducing forward guidance and keeping rates steady, which could increase borrowing costs for AI projects.
Higher Treasury yields and potential rate hikes make AI financing more expensive, challenging the assumption of cheap money that supported many spending plans.
A circular dependency exists: cloud companies borrow for data centers, buy Nvidia chips, and Nvidia raises its own debt, creating a cycle vulnerable to delays or slower growth.
Investors must now consider credit spreads, refinancing risks, and central bank policies, as AI debt issuance grows and equity risk profiles change with increased leverage.

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