Six of the world's largest technology companies are taking on debt and financial risk at a scale that threatens their credit quality, according to a new warning from Moody's Ratings.
The ratings firm released a research note this week saying the race to build artificial intelligence infrastructure is eroding free cash flow and increasing balance-sheet risk at what it calls hyperscalers. The six companies tracked in the report are Microsoft, Amazon, Alphabet, Meta, Oracle, and CoreWeave. According to CNBC, which reviewed the report, Moody's projects capital expenditures across those companies will hit $785 billion in 2026 before reaching about $1 trillion in 2027.
The shift represents a break from the business model that built Silicon Valley. For decades, major tech companies ran on software and intellectual property, structures that required little physical investment and produced large profit margins. Generative AI demands something very different: warehouses packed with expensive, energy-intensive servers and chips.
"Previously, these companies relied on asset-light structures centered on software, intellectual property, and scalable cloud services that required modest capital investment," Moody's said in the Wednesday note. "The transition from asset-light to asset-heavy models requires unprecedented levels of investment and capital raising."
To fund the expansion, tech giants are turning to Wall Street in growing numbers. Direct debt across the six hyperscalers has reached approximately $460 billion, according to Moody's. Alphabet, the parent company of Google, announced an $85 billion equity sale last month. The report notes that the financing surge has produced booming profits for the financial industry.
Companies are also using off-balance-sheet strategies to manage their debt loads. The most common method is long-term data center leases, which allow companies to take on major financial obligations without listing them as traditional debt. Moody's said lease commitments across the group have reached $1.2 trillion. More than $820 billion of that total comes from leases on data centers that have not yet been built.
Moody's said it treats those lease commitments as debt-equivalent liabilities. Because AI hardware and infrastructure require large up-front costs while revenue takes longer to arrive, free cash flow across the sector is under pressure. The firm noted that because AI hardware and infrastructure require massive up-front investment while revenue materializes over a longer time horizon, free cash flow across the sector is coming under pressure.
Despite the warning, Moody's said Microsoft, Alphabet, Amazon, and Meta still hold some of the strongest corporate balance sheets in the world. Their investment-grade credit ratings are not under imminent threat. The most immediate pressure falls on lower-rated companies in the group, including Oracle and CoreWeave.
The report did not say any of the six companies would face a downgrade in the near term, but it made clear that the financial model powering the AI buildout carries risks that will grow as spending climbs toward the trillion-dollar threshold next year.
