Key Takeaways
A J.P. Morgan report reveals Big Tech's artificial intelligence ambitions are now fueled by $455 billion in new debt, as capital spending on data centers is set to outstrip cash flow in 2026. The borrowing spree by a handful of hyperscalers is rapidly altering the composition of corporate bond markets.
"The sheer scale of issuance tied to hyperscalers and data centers over the past year is rapidly reshaping bond markets," a team of J.P. Morgan analysts led by Tarek Hamid said in the Monday report.
The analysis counted $357 billion in direct borrowing from Amazon, Microsoft, Alphabet, Meta Platforms, and Oracle, but also included debt from data center joint ventures designed to keep liabilities off company balance sheets. The wave of bond sales, including a record $30 billion deal from Meta and an $18 billion sale from Oracle, has propelled the AI-related segment to become the largest in the investment-grade market, surpassing U.S. banks.
This debt-fueled expansion marks a structural shift for the tech giants, whose capital expenditures are forecast to consume nearly 100 percent of their operating cash flows in 2026, compared to a 10-year average of 40 percent, according to UBS. The spending boom on AI infrastructure comes as stock buybacks at the same companies fell 64 percent year-over-year in the first quarter, showing a clear reallocation of capital from shareholder returns to infrastructure investment.
While the hyperscalers are borrowing collectively, they present different risk profiles to investors. Microsoft holds a AAA credit rating, with Alphabet (AA+), Meta (AA-), and Amazon (AA) also on the elite end of the spectrum. For these firms, issuing bonds is a matter of capital structure optimization.
Oracle, however, sits at a BBB rating, just two downgrades from junk status. The company is expected to have negative free cash flow until 2029 as its capital expenditures exceed cash from operations, according to Bank of America. The market has taken note, with the cost to insure Oracle's debt more than tripling since September 2025, according to MUFG. Meta has also pursued a different strategy, using a joint venture with Blue Owl to keep $30 billion in data center debt off its balance sheet.
The borrowing is not expected to slow. Bank of America projects the five largest hyperscalers will borrow about $140 billion a year for the next three years. Vontobel estimates about $1.5 trillion in AI or data center-related bond issuance over the next five years, which would make the sector 15 to 20 percent of most corporate bond indexes. For passive bond funds, this means mechanically absorbing more tech debt, increasing concentration risk in a market once dominated by banks and industrial companies.
This article is for informational purposes only and does not constitute investment advice.
