Hyperscalers could borrow an extra $40–50 billion next year. Estimates of hyperscaler 2026 capex range from about $630 billion to $770 billion, and UBS says that could boost borrowing enough to flood the investment-grade market and force investors to reassess AA- and A-rated tech credits.

A historic pivot into the debt market

Tech giants that once treated AI buildout as an equity risk are now tapping long-term debt to finance massive infrastructure plans. FinancialContent’s MarketMinute estimated combined capital expenditure among the largest tech firms at about $630 billion for 2026, while UBS credit strategists put an even higher figure on aggregated capex among hyperscalers — as much as $770 billion in 2026. UBS said those higher capex plans imply roughly a $40 billion to $50 billion increase in borrowing, driving projected public market debt issuance toward $230 billion to $240 billion this year.

The scale is rare. Amazon has signaled multibillion-dollar spending for AWS, Alphabet has executed multibillion-dollar bond deals including a recent century-long sterling bond, and Oracle has been an aggressive issuer, tapping the market for roughly $18 billion last September and planning further issuance in early 2026. That combination — record capex ambitions and active issuance — is changing how investors view corporate credit in a sector that for years benefited from abundant cash and oversized profit margins.

Investors recalibrate the old bargain

For a decade, the tech sector’s balance sheets let companies spend boldly without leaning on debt. Now that bargain is fraying, and fixed-income investors are asking new questions about repayment capacity and priorities.

  • Unspoken contract: "For years, we've been told this AI spend would be funded by generated cash flow — that it's equity risk, it's speculative, and not to worry about it from a credit point of view," said Al Cattermole, fixed income portfolio manager at Mirabaud Asset Management. "There now seems to be a change in the unspoken contract... By bringing capex spend into the debt markets, you now have the question of credit worthiness."
  • Cash allocation pressures: Asset managers are watching how companies balance operating cash flow, heavy AI investment and shareholder programs such as buybacks. FinancialContent reported that by mid-2025 many of the biggest firms concluded operating cash flow alone wouldn't support both aggressive AI buildouts and existing capital-return plans, prompting some to tap bond markets.
  • Market impact: BlackRock, cited in weekly commentary, warned mega-cap issuance is financing near-term investment and adding supply to bond markets already strained by large public deficits — pushing investors to sort winners and losers and demand clearer evidence AI spending will generate durable revenue.

Efficiency gains in AI make the calculus

At the same time hyperscalers pile into data centers and chips, academic and industry research is producing more compute-efficient models for some AI uses.

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"There now seems to be a change in the unspoken contract," said Al Cattermole, fixed income portfolio manager at Mirabaud Asset Management. UBS projects that public market debt issuance could reach roughly $230–240 billion this year.

This article was created with AI assistance.