Svmuu News: Tech giants engaged in a global push to build artificial intelligence data centers have doubled their debt over the past five years. To support an unprecedented surge in capital expenditures, these companies have taken on debt, viewing it as essential to driving economic transformation.According to data compiled by Bloomberg, the five U.S. companies with the largest data center investments—Alphabet Inc., Amazon, Meta Platforms Inc., Microsoft, and Oracle—have collectively taken on approximately $350 billion in new debt over the past five years. These companies are betting that cutting-edge AI services will eventually generate substantial new revenue.Investors have long been enthusiastic about these companies, actively snapping up their bond issuances in various currencies.
However, according to people familiar with the matter, Amazon’s $25 billion bond offering this week met with an unusually cool reception, indicating that capital markets’ capacity to absorb the tech giants’ ongoing financing to support AI investments is not unlimited.Nevertheless, for most of these highly profitable companies, borrowing costs remain relatively modest at present. The five companies’ combined interest expenses last year exceeded $10 billion—more than double the 2019 figure—but this still pales in comparison to the free cash flow of just one of them.
Take Google, for example: as of the end of March, its free cash flow—calculated as cash from operating activities minus capital expenditures—reached $64 billion. However, not all companies are in equally strong financial shape. Amazon’s free cash flow turned negative for the quarter ended March 31;Oracle’s cash burn is expected to accelerate further, with its debt in 2025 projected to be about 2.5 times its annual revenue. On Thursday, S&P downgraded Oracle’s credit rating to the lowest level within the investment-grade category, citing the company’s expanding spending on artificial intelligence. (CLS)