Big Tech debt surge hits $570 billion as AI buildout rewrites financing rules

Big Tech's shift from cash to debt for AI infrastructure is rewiring the bond market and exposing equity investors to interest-rate risk for the first time.

Nvidia sold $25 billion of bonds in June, its first trip to public debt markets since 2021, joining a wave of hyperscaler borrowing that Morgan Stanley projects will hit $570 billion in 2026 — more than double last year's pace.

"The amount of capex being spent is dramatically higher than even the high end of what anyone would have thought not just a year ago but three months ago," Robert Schiffman, senior credit analyst at Bloomberg Intelligence, said. "Buybacks are likely to continue to fall as capital is prioritized for capex."

Alphabet, Amazon, Meta, Microsoft and Oracle sold a combined $121 billion of U.S. corporate bonds in 2025, nearly four times their $28 billion annual average from 2020 to 2024, according to Bank of America data. Alphabet is planning its first equity sale in 20 years, aiming to raise about $85 billion. The four largest AI spenders now forecast as much as $725 billion in capital expenditures this year, with hyperscaler spending on course to consume close to 100% of operating cash flow, up from a 10-year average of about 40%, by UBS's estimate.

By October 2025, AI-linked debt had grown to roughly $1.2 trillion and become the largest single sector in the investment-grade bond market, surpassing U.S. banks in the JPMorgan U.S. Liquid index, according to JPMorgan research. That means pension funds, insurance portfolios and target-date retirement accounts — investors who own no technology shares at all — are now exposed to the same wager on compute demand. Should AI revenue disappoint, issuers would face rising leverage and wider credit spreads at the moment they need to refinance.

Buybacks Vanish as CapEx Swallows Cash

The spending spree has all but eliminated share repurchases among the biggest AI builders. Only Microsoft bought back stock in the first quarter, spending $3.4 billion — the lowest total among the group in nearly a decade, according to Bloomberg data. Alphabet, which plowed about $280 billion into buybacks over the past five years, did not repurchase any shares in Q1 2026 after spending more than $15 billion in the same period a year ago. Meta Platforms is reportedly weighing an equity offering that could raise tens of billions of dollars.

Nvidia, the primary beneficiary of the AI buildout, stands apart. The chipmaker earmarked $80 billion for repurchases last month and spent roughly $20 billion on buybacks in its fiscal first quarter. Yet even Nvidia chose to tap the bond market rather than drain its cash reserves, issuing $25 billion in seven tranches with maturities stretching to 2056. Moody's assigned the notes its second-highest rating of Aa1 with a positive outlook; S&P rated them AA. Investors accepted yields only 20 to 65 basis points above U.S. Treasuries — pricing that signals no distress, only prudence.

What the Debt Shift Means for Tech Investors

The structural change carries a direct implication for equity holders. For years, Big Tech's appeal rested partly on capital-light business models that generated enormous free cash flow and funded steady buybacks. That model is inverting. As debt replaces equity in the capital structure, earnings per share lose the artificial boost from share-count reduction, and interest expense becomes a new drag on net income.

"The risk profile has changed," said Brent Fredberg, portfolio manager and tech sector analyst at Brandes Investment Partners, which manages $43 billion in assets. "Over the past decade they were capital light and had huge network effects. But increasingly free cash flow is declining, balance sheets are less attractive but still strong, and now they're going from buying back shares to issuing shares."

For now, investors have given the biggest spenders the benefit of the doubt. Alphabet shares are up 17% this year, outpacing the S&P 500's 9.5% gain. But the new leverage means any hawkish surprise from the Federal Reserve would hit these companies harder than in the past, as higher rates raise the cost of the debt they now depend on. Conversely, rate cuts would disproportionately benefit the newly leveraged giants — making the bond market a new focal point for anyone trading tech stocks.

This article is for informational purposes only and does not constitute investment advice.