S&P Global estimates the world's biggest technology firms likely have more AI-linked liabilities than currently known. S&P Global Head for Digital Infrastructure Mark Habib said interconnected financing structures can involve hyperscalers effectively guaranteeing huge data center builds or smaller AI companies. Habib said during a London roundtable that it was safe to assume more debt exists than S&P can see.
Habib said unreported liabilities are not part of hyperscalers' disclosures. Habib said S&P might lack visibility when S&P does not rate transactions where liabilities may accrue. Habib said no estimate existed of how much additional debt circular financing might add to firms' balance sheets. Habib said S&P was trying to take a holistic view.
S&P expects the top six US hyperscalers to spend more than $7 trillion on data centers and other AI-related capital expenditure between 2025 and 2030. S&P identifies those firms as Amazon, Microsoft, Alphabet, Oracle, Meta and SpaceX. S&P expects those firms to have negative free cash flow until at least next year.
Debt issued by AI infrastructure providers and neocloud firms, such as Nvidia-backed CoreWeave, has fallen to increasingly stressed levels in recent weeks. Concerns about the aggressive scale of borrowing have accompanied the declines. Habib said the biggest risk to hyperscalers' ratings remains whether expected profits fail to materialize. S&P downgraded Oracle in July to BBB-, the lowest investment-grade rating, over AI spending concerns and an uncertain path to profitability.
Habib was asked whether the recent selloff in bonds linked to the aggressive AI buildout indicated that investors considered the bonds riskier than ratings suggested. Habib said S&P currently saw no major disconnect requiring ratings changes. Habib said S&P's ratings were designed to take a longer-term view. Habib said evidence that spending was no longer sustainable could change that assessment. Habib cited further increases in AI firms' investment or "a view that the revenue rate of competition is getting too intense" as possible drivers.
S&P Global Warns Top Hyperscalers May Have Hidden AI-Linked Debt
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Summary
S&P Global warns top U.S. hyperscalers may face hidden AI-linked debt, affecting support and resistance in their financial outlook. The six firms—Amazon, Microsoft, Alphabet, Oracle, Meta, and SpaceX—are expected to spend over $7 trillion on AI infrastructure from 2025 to 2030, with negative free cash flow until at least 2027. Unreported liabilities from neocloud firms like CoreWeave remain unclear, and S&P lacks visibility into unrated deals. Oracle was downgraded to BBB- in July due to AI spending concerns. The risk-to-reward ratio for investors appears skewed as debt from AI providers declines amid borrowing worries.
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