What happened
Big Tech companies, including Amazon and Alphabet, are rapidly increasing debt for AI infrastructure, shifting from cash-rich entities to major borrowers. Morgan Stanley projects AI-related debt will reach $570 billion in 2026, more than double 2025's total, with $236 billion already sold by May. Alphabet issued a £1 billion 100-year sterling bond at a 6.125% coupon in February, while Amazon raised €14.5 billion and C$14 billion in record-setting bond sales. Hyperscaler capital spending is set to consume nearly all operating cash flow in 2026, up from a 10-year average of 40%. AI-linked debt reached $1.2 trillion by October, becoming the largest slice of the investment-grade market.
Why it matters
Pension fund managers and investment teams face increased exposure to AI-linked debt, which reached $1.2 trillion by October, becoming the largest segment of the investment-grade market. Hyperscalers are borrowing against future operating cash flow to fund AI infrastructure, with 2026 capital spending projected to consume nearly all cash flow, up from a 40% 10-year average. This follows reports of Big Tech AI spend halving cash flow, indicating a systemic shift where long-term investors are now financing a concentrated, unproven technology bet.
