Moody's Warns Unprecedented AI Spending Threatens Credit Quality of Major Tech Firms
Moody's Ratings has warned that the rapid expansion in artificial intelligence infrastructure is eroding free cash flow and increasing balance-sheet risk for major tech companies, including Alphabet (GOOGL), Microsoft (MSFT), Amazon (AMZN), Meta (META), Oracle (ORCL), and CoreWeave (CRWV). The firm noted a shift from asset-light to capital-intensive business models that require unprecedented levels of investment. Moody's estimates capex for these firms will reach $785 billion in 2026, rising toward $1 trillion by the following year. To fund AI ambitions, companies are increasingly relying on debt and equity sales, with total direct debt across the six hyperscalers reaching approximately $460 billion. Additionally, off-balance-sheet financing through long-term data center leases has surged to $1.2 trillion in commitments. While these obligations do not appear as traditional debt, Moody's considers them equivalent liabilities that will bind companies to significant future rent payments. Despite the risks, Moody's emphasized that Microsoft, Alphabet, Amazon, and Meta still maintain strong balance sheets, making a downgrade of their investment-grade ratings unlikely at this time.
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Topics: AI infrastructure balance sheet risk free cash flow erosion hyperscalers