Tech giants' bond binge raises red flags for AI boom
XLK•Oracle credit risk stands out
Oracle stands out in particular: its 5-year credit default swaps ORCL5YUSAX=MG — a form of insurance against default — recently surged to an 18-year high, signaling rising doubts about Oracle's creditworthiness.
Still, Hilmer notes that the debt trend is unlikely to trigger an AI bubble burst, but could exacerbate the downturn once investor sentiment shifts.
Borrowing volumes have surged sharply
"Creative financing structures" that may obscure true debt levels, off-balance-sheet borrowing aided by private credit firms, and lease and purchase commitments for computing and chips capacity are other signs that warrant caution, Hilmer said.
The scale of borrowing has surged dramatically. Combined, Amazon AMZN.O, Alphabet GOOGL.O, Meta Platforms META.O and Oracle ORCL.N issued about $194 billion of bonds in 2026 through July 7, up 79% from roughly $108 billion in all of 2025, according to a Reuters analysis of LSEG data.
This borrowing spree has coincided widening corporate bond spreads for these companies, now approaching levels not seen since 2022, during the pandemic-era technology boom, said Hilmer.
Bond funding is growing as AI spending rises
Weakening debt fundamentals for hyperscalers, despite most having abundant capacity to borrow even more, could be another sign the AI rally might be entering its final phase, said Elias Hilmer, an economist at Capital Economics.
Hilmer highlights a couple of red flags which investors should watch, the first being reducing margins on free cash flow (FCF), which is pushing hyperscalers toward the bond market to fund their AI ambitions.
A source familiar with the matter told Reuters early in August that Alphabet was looking to raise between $20 billion to $25 billion from its latest U.S. bond sale — just weeks after the Google-parent marked its first-ever quarter of negative free cash flow.
