AI data centre boom doubles Big Tech debt to $350 billion in five years

The biggest builders of AI data centers have doubled their debt loads in the past five years and turned to borrowing to finance an unprecedented spending spree they claim is needed to transform the economy.

Alphabet, Amazon. Meta Platforms, Microsoft and Oracle, the top five spenders on new U.S. data centers, have added nearly $350 billion combined to debt obligations over the past five years, according to data compiled by Bloomberg.

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They are betting heavily that cutting-edge AI services will mean a new revenue stream in the future. Investors enthusiastically supported the companies by purchasing new bonds issued in various currencies. But buyers had an unusually cool response to Amazon’s $25 billion issuance this week, people with knowledge of the matter told Bloomberg; This is a sign that there is a limit to the amount of money that can be used to support the investments of tech giants.

The cost of this debt is still relatively small for most highly profitable companies. Interest expense on five of them exceeded $10 billion last year. That’s more than double what it was in 2019, but it pales in comparison to the free cash flow of just one of those. Google’s cash from operations minus capital expenditures was $64 billion at the end of the March quarter.

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Other companies’ balance sheets show more pressure. Amazon’s free cash flow went negative in the quarter ending March 31. Cash burn is expected to accelerate at Oracle, whose debt is approximately 2.5 times its sales in 2025. S&P Global Ratings on Thursday downgraded Oracle to the lowest investment-grade rating, citing the company’s increased artificial intelligence spending.

Software companies are generally high-margin businesses that don’t require a lot of regular capital expenditure. For the industry’s biggest players, this has begun to change with the advent of cloud computing, which requires large investments in server farms. AI data centers, which are often larger and have more expensive chips than previous facilities, have driven up that spending.