Alphabet (GOOGL) and Meta (META), a bond bomb in disguise?... "A $46 billion debt party"

▲ Alphabet (GOOG·GOOGL), Google, Artificial Intelligence (AI)/AI-generated image

Global big tech and artificial intelligence (AI) companies are aggressively expanding their data centers and computing infrastructure. To fund this, they are issuing massive amounts of bonds and stocks, causing the tech sector's funding volume to double in just one year. Warnings are emerging that the expansion of credit spreads and rising financing costs due to surging debt could suppress profitability and stock prices.

Brian Sozzi, host of Yahoo Finance's financial program Sozzi Unleashed, cited a recent report by Barclays analyst Vinu Krishna on October 1 (local time) to examine the funding status of hyperscalers, data center Special Purpose Vehicles (SPVs), and neo-cloud companies. According to the report, the total capital raised by these companies through investment-grade bonds, high-yield bonds, and equity issuance surged from $172 billion in 2025 to $346 billion year-to-date.

An unprecedented supply of corporate bonds is flooding the market, setting off clear warning signs in the bond market. Over the past two quarters, an unparalleled surge in credit supply has hit the market, leading to a noticeable widening of credit spreads. Sozzi explained, "Widening credit spreads are a typical risk signal that increases companies' capital funding costs, erodes profitability, and weighs down stock prices." Warnings about convertible bonds are being detected across hyperscalers, data centers, and neo-cloud companies, and Credit Default Swap (CDS) spreads have also risen sharply since 2026. The pace of debt issuance by big tech, such as Alphabet Inc. (GOOGL) issuing 100-year bonds and Meta Platforms Inc. (META) issuing billions of dollars in bonds, is exceeding limits.

The debt reliance of large AI startups that are not yet generating their own profits is also reaching dangerous levels. OpenAI, having decided not to proceed with an IPO this year, is seeking to raise over $30 billion to cover data center expansion and computing costs. Sozzi mentioned the aggressive fundraising tendencies of Sarah Friar, OpenAI's CFO and former CEO of Nextdoor Holdings Inc. (KIND), predicting that the actual amount raised could exceed $30 billion.

Competitor Anthropic also raised $65 billion in May, pushing its valuation to approximately $965 billion. While the Silicon Valley AI camp is pouring astronomical external funds into infrastructure expansion, the imbalance in bond market supply and demand coupled with rising financing costs is intensifying Wall Street's doubts about the overall financial health of tech stocks.

[Article Summary]

-The scale of bond and stock financing by big tech and AI companies surged from $172 billion in 2025 to $346 billion this year.

-Unprecedented oversupply of bonds has led to a sharp rise in credit spreads and CDS premiums, pressuring capital costs.

-Debt-driven infrastructure expansion, such as profit-lacking OpenAI seeking to raise over $30 billion, is increasing risks.

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