Morgan Stanley: AI giants including Google, Meta, Amazon, Microsoft, Oracle, and NVIDIA have accumulated over $1.3 trillion in off-balance sheet long-term commitments, making their true leverage difficult to assess.

Morgan Stanley's latest research report indicates that hyperscale cloud providers and chip giants have accumulated over $1.3 trillion in long-term commitments, comprising more than $640 billion in purchase commitments and approximately $675 billion in lease commitments. A significant portion of these commitments remains off-balance sheet, making it difficult for investors to accurately assess the true leverage levels of these companies. The growth of their off-balance sheet leverage has far outpaced their on-balance sheet leverage. The report emphasizes that should AI demand expectations reverse, the scope for renegotiation would be extremely limited. From a cash flow pressure perspective, Meta's combined lease and purchase commitments are approximately 1.7 times its projected operating cash flow for the next 12 months, while for Oracle, this ratio exceeds 7 times. NVIDIA, in its efforts to secure wafer foundry capacity and memory supply, has seen its inventory and related purchase commitments rise to approximately 32% of market-expected FY27 revenue. Should demand decline, the downside risk would be amplified.