Tech Giants Shift $120 Billion in AI Debt Off Balance Sheets
Tech giants like Meta and Oracle shift $120 billion in AI debt off balance sheets, raising investor concerns amid an AI infrastructure boom.
AI Giants Borrow Billions for Data Centers, Sparking Debt Investor Concerns
Major technology companies, including Meta, Oracle, xAI, and CoreWeave, have shifted over $120 billion in AI data center debt off their balance sheets through special purpose vehicles (SPVs), drawing wariness from debt investors amid a record borrowing spree fueled by the AI infrastructure boom. This financial maneuvering, reported extensively in late December 2025, allows firms to protect credit ratings while funding massive expansions, but it raises risks of a broader U.S. financial shock if AI demand falters.
The Surge in AI-Driven Debt Issuance
Tech hyperscalers like Meta, Alphabet, Microsoft, Amazon, and Oracle are pouring unprecedented sums into AI infrastructure, with global spending projections reaching $5-7 trillion by 2030. In 2025 alone, these companies issued $121 billion in bonds—over four times the five-year average of $28 billion—as capital expenditures (capex) ballooned to represent 1.6% of U.S. GDP, expected to hit 3% in 2026 per Goldman Sachs estimates.
Operating cash flow for the top five hyperscalers is forecasted at $577 billion in 2025, up from $378 billion in 2023, while total debt climbs to $433 billion from $356 billion, improving the debt-to-cash ratio to 0.75 from 0.94. Bank of America analysts note these firms maintain conservative balance sheets, enabling "elevated debt issuance" for flexibility and lower costs, as seen in recent tens-of-billions bond deals by Meta, Alphabet, and Amazon.
Yet, the scale strains even cash-rich giants. Morgan Stanley estimates $1.5 trillion in external financing is needed for AI plans, pushing firms toward private credit markets now valued at $1.7 trillion. Tech groups borrowed $450 billion from private funds by early 2025, a $100 billion jump year-over-year, with $125 billion flowing into project finance deals like data centers.
Off-Balance-Sheet Financing: The SPV Strategy
To avoid bloating corporate balance sheets, companies create SPVs—separate entities that own data center assets, issue debt, and lease them back to the tech firms. This "balance sheet arbitrage" keeps liabilities off 10-K filings, preserving credit ratings.
- Meta sealed the largest such deal in October 2025: a $30 billion agreement with Blue Owl Capital for its Hyperion facility in Louisiana via SPV "Beignet Investor," netting Meta $3 billion in cash while offloading debt.
- Oracle has multiple deals totaling over $69 billion, including $13 billion (with $10 billion debt) for its OpenAI facility in Abilene, Texas; $38 billion for sites in Texas and Wisconsin; and $18 billion for New Mexico—all leased back from SPVs funded by Blue Owl and JPMorgan.
- xAI (Elon Musk's venture) and CoreWeave follow suit, contributing to the $120 billion total shifted off-books, backed by Wall Street players like Pimco, BlackRock, Apollo, and JPMorgan.
Microsoft bucks the trend somewhat, contributing equity to its $100 billion AI Infrastructure Partnership (AIP) fund at 233% leverage—at the fund level, not corporate—avoiding direct bond issuance. Google, Microsoft, and Amazon often rely on internal cash or straight debt, unlike SPV-heavy peers.
Contrasting Approaches Among Hyperscalers
Financial strategies diverge sharply:
| Company | Total Debt | Operating Income | Debt/OpInc Ratio | Years to Payback | Financing Style |
|---|---|---|---|---|---|
| Oracle | $131.7B | $17.7B | 7.4x | 7.4 years | Heavy on-balance debt, SPVs |
| Microsoft | $43.2B | $128.5B | 0.3x | 4 months | Equity in leveraged AIP fund |
| Meta | N/A | N/A | N/A | N/A | SPVs like $30B Beignet |
Oracle stands out as riskiest, with negative free cash flow through 2029 and a $15 billion capex hike for fiscal 2026, rattling investors amid surging lease obligations. Its debt-to-equity ratio nears 500%, threatening ratings. In contrast, peers like Microsoft enjoy robust cash flows, funding capex without strain.
Risks and Investor Wariness
Debt investors grow cautious as private credit's illiquidity, asset inflation, and borrower concentration amplify vulnerabilities. SPVs offer lenders recourse to physical assets—land, chips, buildings—but an AI hype bust could trigger defaults, rippling to Wall Street. A finance source warned of "risky loans piling up," predicting turbulence if AI monetization lags investments.
Unlike the 1990s telecom bust, today's leaders boast stronger fundamentals: healthier balance sheets and proven cash generation. Still, consensus capex expectations doubled in 2025, with actual needs likely higher. By 2029, hyperscaler cash flow could hit $1.1 trillion (up 95%), outpacing capex growth at 58% to $632 billion.
Industry Implications and Future Outlook
This debt-fueled AI arms race intertwines Big Tech with private credit, potentially stabilizing markets via demand but heightening systemic risks. Investors weigh robust demand visibility against shareholder pressure for growth versus credit preservation. UBS notes surging project finance inflows signal private capital's enthusiasm, but warns of overextension.
As AI infrastructure scales, the core question persists: Can hyperscalers sustain trillions in spending without credit erosion? For now, innovative structures like SPVs provide breathing room, but vigilance is key amid whispers of an impending "AI bubble" test. Wall Street's role in funding the future underscores AI's transformative stakes—not just technological, but profoundly financial.
