AI boom enters new phase as debt markets question cost of infrastructure race

The artificial intelligence boom is increasingly shifting from an equity market story to a credit market story as technology companies borrow billions of dollars to fund data centres, processors and energy infrastructure.

Alphabet, Meta, Microsoft, Amazon and Oracle have collectively committed trillions of dollars to AI infrastructure as competition for computing capacity intensifies.

But investors are becoming more sensitive to how those projects are financed and when they will generate returns.

Alphabet raised €6 billion through a European bond sale this week, while Oracle launched a US$20 billion capital raising combining debt and equity.

Microsoft has also returned to the bond market with a US$25 billion issue, while Meta is considering raising at least US$20 billion.

AI-related debt issuance this year is estimated at roughly US$500 billion.

At the same time, the cost of insuring technology company debt against default has risen sharply, indicating that credit investors are demanding more protection.

The issue is not whether demand for AI is growing.

Cloud revenue remains strong across the major platforms.

Instead, investors are increasingly asking whether the huge amounts of capital required to support that growth can generate sufficient returns.

That shift could make cash flow, debt levels and financing costs just as important as revenue growth in determining the next stage of the AI trade.