Odaily Planet Daily report: Over the past five years, tech giants aggressively building AI data centers globally have doubled their debt levels. To fund an unprecedented surge in capital expenditures, these companies have taken on substantial debt, viewing it as essential for driving economic transformation. According to Bloomberg data, the five U.S. companies with the largest investments in data centers—Alphabet Inc., Amazon, Meta Platforms Inc., Microsoft, and Oracle—have collectively added approximately $350 billion in new debt over the past five years. These firms are betting that cutting-edge AI services will ultimately generate significant new revenue. Investors have previously shown strong enthusiasm for these companies, actively subscribing to their various bond issuances.
However, according to insiders, Amazon’s $25 billion bond offering this week encountered unusually weak demand, indicating that capital markets’ capacity to absorb continued financing from tech giants to support AI investments is not limitless. Nevertheless, for most of these companies, borrowing costs remain relatively modest. Combined interest expenses for the five companies last year exceeded $10 billion—more than double the amount in 2019—but still pale in comparison to the free cash flow of even just one of them.
For example, as of the end of March, Google's free cash flow, after deducting capital expenditures from operating cash flow, reached $64 billion. However, not all companies have equally strong financial positions. Amazon's free cash flow turned negative for the quarter ended March 31; Oracle is expected to accelerate its cash consumption, with its debt level in 2025 projected to be about 2.5 times its annual revenue. S&P downgraded Oracle's credit rating to the lowest investment-grade level on Thursday, citing the company's ongoing expansion in artificial intelligence spending. (CLS)