AI spending spree drives global tech debt issuance to record high

By Patturaja Murugaboopathy

Dec 22 (Reuters) - Global exertion companies person ramped up indebtedness issuance this twelvemonth to grounds levels, arsenic an intensifying contention to physique artificial quality capableness forces adjacent ​cash-rich firms to get heavy to money that investment.

According to Dealogic data, planetary tech ‌companies issued $428.3 cardinal of bonds successful 2025 done the archetypal week of December. U.S. firms accounted for $341.8 billion, portion European ‌and Asian tech companies issued $49.1 cardinal and $33 billion, respectively.

Traditionally reliant connected interior currency flows, ample tech firms person progressively turned to debt, arsenic borrowing costs are debased and capitalist request is strong.

Michelle Connell, president astatine Portia Capital Management, said debt-funded AI capex reflects a structural shift, arsenic accelerated technological obsolescence and ⁠short spot lifespans unit companies to ‌reinvest continuously.

The dense issuance, however, has begun to assistance leverage and weaken sum ratios for immoderate firms, raising questions astir however equilibrium sheets would clasp ‍up if AI investments neglect to present expected returns.

That said, the biggest tech firms are mostly profitable, person ample currency buffers and a fig of them fertile among the world's astir invaluable by marketplace capitalisation.

A Reuters investigation ​of much than 1,000 tech firms with marketplace capitalisations of astatine slightest $1 cardinal shows their ‌median debt-to-EBITDA ratio roseate to 0.4 astatine the extremity of September, astir treble the level seen during the 2020 indebtedness surge. While leverage remains beneath levels typically viewed arsenic alarming, the summation suggests indebtedness is rising faster than earnings, which tin airs a hazard if currency flows neglect to support pace.

The median operating currency flow-to-total-debt ratio besides fell to a five-year debased of 12.3% successful the ⁠second 4th earlier recovering modestly aboriginal successful the year.

Credit ​markets person begun to bespeak rising capitalist caution. Five-year CDS ​spreads connected Oracle person astir doubled to 142.48 ground points implicit the past 2 months, portion Microsoft’s spreads person climbed to astir 35 ground points from ‍around 20.5 astatine the extremity ⁠of September.

"I presumption this improvement arsenic the effect of an overheated marketplace that has created its ain self-serving communicative — spell large oregon spell location successful presumption of banal price," said ⁠Scott Bickley, an advisory chap astatine Info-Tech Research Group.

"This is neither sustainable nor repeatable arsenic a imperishable displacement successful ‌operating modes for the hyperscalers."

(Reporting By Patturaja Murugaboopathy; with further reporting by Gaurav Dogra successful ‌Bengaluru; Editing by Amanda Cooper and Alexandra Hudson)