Investors Are Growing Wary of AI-Related Debt
Demand for hyperscaler company bonds has waned this year.
Overview
Hyperscalers -- the giant AI companies now racing to build AI data centers as quickly as possible -- have been issuing reams of corporate debt over the past year to fund their efforts.
Morgan Stanley estimates that AI-related global debt issuance totaled $236 billion as of May 31 -- 4 times as much as one year prior. And the investment bank expects AI bond issuance to grow to $570 billion by the end of 2026.
Details
Just four companies, Meta Platforms (NASDAQ: META), Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT), are expected to spend a total $700 billion on capex this year, with most of it going toward AI-related outlays, and the forecasts suggest that over the next few years, such spending is only going increase. Such companies have long relied on strong cash flows to cover their capital investment needs, but the sheer scale of the AI data center build-out has sent the hyperscalers to the bond market for funding.
Source
Originally published at www.fool.com.