The agency Moody's Ratings warns that the multi-million dollar spending on artificial intelligence infrastructure is eroding cash flow and increasing financial risk for six major tech companies, including Microsoft, Amazon, and Alphabet.
The AI frenzy is taking a toll on the finances of tech giants. Moody's Ratings has issued a warning: the race to build AI infrastructures, valued at trillions of dollars annually, is draining cash flow and increasing risks to the solvency of leading companies in the sector.
In a research report published this week, the credit rating agency points out that even corporations with the strongest liquidity in the world, such as Alphabet and Microsoft, are being forced to resort to debt financing, stock offerings, and other solutions to fund their AI ambitions.
The study focuses on six companies monitored by Moody's: Microsoft, Amazon, Alphabet, Meta, Oracle, and CoreWeave. According to the agency, all of them are seeing their credit ratings compromised by the enormous outlay required by artificial intelligence.
Traditionally, these companies operated with a structure of few fixed assets, focused on software, intellectual property, and scalable cloud services, which required moderate capital investment. Now, the transition to an asset-intensive model demands unprecedented levels of investment and capital mobilization.
Moody's forecasts that capital expenditures—investments in physical assets such as data centres—will reach $785 billion by 2026 and approach $1 trillion the following year.
To finance this expansion, tech giants are increasingly turning to the stock market. Alphabet, Google's parent company, announced last month a stock sale worth $85 billion. The total direct debt of the six companies amounts to approximately $460 billion, according to Moody's.
AI hardware and infrastructure require massive initial investment and only generate long-term revenue, which significantly pressures the free cash flow of the sector.
One of the most common strategies to avoid excessive debt on balance sheets is signing long-term leasing contracts for data centres instead of purchasing them outright. According to Moody's, the leasing commitments of the tech group have skyrocketed to $1.2 trillion. More than $820 billion of that amount corresponds to contracts that have yet to come into effect, meaning data centres still under construction.
Although these obligations do not take the form of traditional debt, the agency considers them equivalent, as companies will face significant future payments.
Despite the warning, Moody's emphasizes that Microsoft, Alphabet, Amazon, and Meta still have some of the strongest balance sheets in the world, making it unlikely that their investment-grade credit ratings will be threatened in the short term.
The immediate pressure is focused on lower-ranked entities, such as Oracle and CoreWeave. Oracle has a Baa2 rating with a negative outlook, just two notches above 'junk bond' status. CoreWeave, on the other hand, is rated Ba3 (high risk) due to the complex private debt load used to finance its GPU hardware system.
For investors and analysts, the conclusion is clear: the AI revolution is redefining the risk profiles of major tech firms, and debt and leases will be key in the coming years to keep pace with innovation without losing solvency.
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