Moody’s Ratings has issued a cautionary report highlighting that unprecedented capital outlays for artificial intelligence infrastructure are putting pressure on the credit quality of major technology companies including Amazon, Meta, Alphabet, Microsoft, Oracle, and CoreWeave. This rapid shift towards asset-heavy AI investments is reducing free cash flow and increasing reliance on debt and equity markets, a departure from the traditional asset-light business models that focused on software and cloud services. Moody’s projects these AI-related capital expenditures to reach $785 billion in 2026 and escalate to roughly $1 trillion in 2027.

The ratings agency points out that as these hyperscalers race to build AI infrastructure—characterized by expensive, energy-intensive data centers and chips—many are turning to large-scale borrowing and stock sales to fund their ambitions. Alphabet, for example, recently announced an $85 billion equity capital raise specifically for AI buildout. Moody’s notes that these moves include increased off-balance-sheet financing such as long-term leasing commitments on data centers, which now total about $1.2 trillion across the sector. These lease obligations, though not reflected as traditional debt, are considered debt-equivalent liabilities, tightening future financial commitments.

Despite the concerns, Moody’s emphasizes that Microsoft, Alphabet, Amazon, and Meta continue to hold some of the strongest corporate balance sheets globally, making a near-term downgrade of their investment-grade ratings unlikely. However, lower-rated companies like Oracle, with its Baa2 rating and negative outlook, and CoreWeave, rated Ba3, face greater financial risks given their heavy dependence on more complex debt structures and their smaller scale relative to the tech giants. The report also highlights a circular ecosystem in AI investments, where hyperscalers invest billions into AI firms like OpenAI and Anthropic, which in turn purchase large amounts of cloud computing resources from the same hyperscalers.

Moody’s concludes that the tech industry’s financial profile is undergoing a significant structural shift as AI-related spending reshapes capital allocation and debt exposure. While demand for AI computing remains strong and lasting customer contracts provide some revenue predictability, investors should closely monitor these companies’ ability to generate adequate returns on their sizable AI investments. The evolving landscape represents a departure from the asset-light cloud era and introduces new credit risks tied to the vast and costly infrastructure needed to power next-generation AI technologies.