The question "who is funding AI" got a clear answer this week: the debt market. Microsoft priced a $25 billion bond offering to fund general needs, including growing spending on AI infrastructure. According to reports, the offering drew about $115 billion in orders and is due to close tomorrow.
Meta: another $20 billion
Meanwhile, according to Bloomberg, Meta is considering a cross-border bond offering of at least $20 billion, possibly more depending on demand. It comes after Meta sold $25 billion of stock, and after S&P changed its rating outlook to negative over AI spending. Meta has also disclosed future commitments of more than $800 billion, about half of them leases that haven't yet started.
Why it's new
For years, the tech giants were cash machines that didn't need to borrow. Now, as they spend hundreds of billions a year on data centers, even their huge profits aren't enough. Alphabet posted negative free cash flow last quarter, and Amazon, Meta and Microsoft are raising debt on an unprecedented scale.
What it means
The huge demand for Microsoft's bonds shows investors still trust the giants. But as debt grows, so does risk: if AI doesn't generate the revenue the companies hope for, repayments will weigh. And in a high-rate environment, as the Fed made clear last week, this money isn't cheap.
