"Bank of America just issued research that points to a potentially troubling shift in how major tech companies fund their artificial intelligence (AI) ambitions. It noted borrowing for AI data centers exploded higher in September and October, with firms like Meta Platforms ( NASDAQ:META ), Oracle ( ), and others issuing $75 billion in bonds and loans - more double the annual average over the past decade."
"This comes as capital expenditures approach limits on what company cash flows alone can support. Consensus estimates show AI capex hitting 94% of operating cash flow minus dividends and share repurchases in 2025 and 2026, up from 76% in 2024. This trend raises questions about sustainable growth amid high valuations, as companies may increasingly rely on debt to build the infrastructure AI models and computing power require."
"Bank of America's analysis highlights this pivot, noting a surge in borrowing in recent months . For instance, aggregate values for key players including Amazon ( NASDAQ:AMZN ), Alphabet ( NASDAQ:GOOG )( NASDAQ:GOOGL ), Microsoft ( NASDAQ:MSFT ), and others show capex shares rising sharply. This suggests the self-funded model that drove rapid AI progress may be causing strain, forcing companies to tap debt markets to maintain momentum."
A recent analysis shows a sharp increase in borrowing for AI data centers, with Meta, Oracle and others issuing about $75 billion in bonds and loans. AI capital expenditures are projected to consume roughly 94% of operating cash flow minus dividends and buybacks in 2025–2026, up from 76% in 2024. Large tech firms historically funded AI growth from cloud and advertising cash flows, but massive data center buildouts now require external financing. Aggregate capex shares for major players are rising, global data center spending could reach $3 trillion by 2028, and leverage in the sector is increasing.
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