Top hyperscalers likely to have more AI-linked debt than now known, S&P Global warns

S&P Global warns that global tech giants may have more undisclosed AI-linked liabilities due to debt issued by AI infrastructure providers and neocloud firms like Nvidia-backed CoreWeave. The company's top analyst in this sector, Mark Habib, stated that the biggest risk to hyperscalers' ratings is whether expected profits fail to materialize.

However, Habib also mentioned the issue of interconnected financing structures, where hyperscalers guarantee large data center builds or support smaller AI companies. It is estimated that the top six US hyperscalers - Amazon, Microsoft, Alphabet, Oracle, Meta, and SpaceX - will spend over $7 trillion on data centers and AI-related capex between 2025 and 2030, with negative free cash flow until at least next year.

S&P does not have an estimate of how much additional debt might be added to firms' balance sheets through these circular financing structures, but they are trying to take a holistic view. Oracle was downgraded to BBB- in July due to concerns about its AI spending and uncertain path to profitability. For now, S&P does not believe there is a major disconnect that requires rating changes, but this could change if it becomes clear that the spending is no longer sustainable, either due to increased investments by AI firms or intense competition.