Moody’s flags credit risks as tech giants take on debt to finance AI race

Moody’s says the race to build artificial intelligence infrastructure is pushing some of the world’s cash-richest companies to take on heavy debt and other liabilities, raising concerns about their credit quality. 

In a July 22 note, the firm most well-known for its issuance of credit ratings, said the shift from software-driven business models to capital-intensive AI infrastructure is forcing free cash-flow-heavy firms such as Alphabet and Microsoft to rely on borrowing, equity sales and off-balance-sheet financing to fund their expansion.

The company said the six hyperscalers it tracks — Microsoft, Amazon, Alphabet, Meta, Oracle and CoreWeave — are facing credit pressure as their direct debt has risen to about $460 billion. 

Moody’s also said lease commitments across the group have climbed to $1.2 trillion, including more than $820 billion in leases that have not yet started because the data centres are still under construction. 

The report said capital spending on AI infrastructure will reach $785 billion in 2026 and approach $1 trillion the following year. That level of investment marks a sharp break from the long-running Silicon Valley model, in which software could be scaled with relatively little physical infrastructure. 

Moody’s said the new model requires vast data centres filled with expensive, energy-hungry servers and chips, which is why even companies with strong cash positions are turning to Wall Street for financing.

The result, according to the ratings firm, is a growing financial burden that could reshape how the tech sector is funded in the years ahead. 

By Nazrin Sadigova