Last November, Bank of America analysts issued a stark warning: hyperscaler borrowing for AI data centers was exploding. Meta Platforms (NASDAQ:META) | META Price Prediction, Oracle (NASDAQ:ORCL), and others issued bonds and loans at double the pace of the prior decade.
Companies that once self-funded massive expansions through overflowing cash reserves have now tapped those resources dry and must turn to debt. Smaller players joined the frenzy, too — Applied Digital (NASDAQ:APLD) and Coreweave (NASDAQ:CRWV) among them — sparking fears of contagion that could ripple through tech stocks.
Now Amazon (NASDAQ:AMZN), fresh off a $15 billion U.S. dollar bond sale in November — its first in three years — is back at the well with a jumbo cross-Atlantic offering. The e-commerce and cloud giant is targeting $37 billion to $42 billion equivalent in a mix of U.S. dollar and euro-denominated bonds.
Hyperscalers Shift from Cash to Credit
This marks a dramatic pivot for Big Tech. For years, hyperscalers like Amazon funded AI infrastructure internally, but Morgan Stanley warned that AI-related capital expenditures (capex) by hyperscalers like Amazon, Meta, and Microsoft (NASDAQ:MSFT) from 2025 to 2028 will require $2 trillion, with over $1 trillion of that financed through new debt.
Explosive e-commerce growth and AWS profits generated more than enough cash for Amazon, but the scale of the AI buildout has changed everything. Amazon alone guided for $200 billion in capital expenditures this year — up sharply from 2025 levels — to construct data centers, secure chips, and expand cloud capacity. Operating cash flow, while robust at roughly $140 billion in 2025, cannot cover the gap without dipping into external financing. The new bond sale will help bridge that shortfall for general corporate purposes, including AI-driven capex, acquisitions, and potential share support.
Amazon’s Debt Load is Manageable for Now
Amazon’s existing long-term debt sits at approximately $65.6 billion, incorporating the prior $15 billion raise. Adding $37 billion to $42 billion would push total debt toward $100 billion-plus. On the surface, that sounds enormous. Yet context matters. Amazon’s market capitalization of almost $2.3 trillion, and its investment-grade credit rating remains rock-solid. Operating cash flow continues to climb with AWS acceleration, and CEO Andy Jassy has repeatedly emphasized that new AI capacity is monetizing “as fast as we can install it.” Free cash flow may turn negative temporarily in 2026, but analysts view this as a short-term trade-off for long-term dominance.
Compared with peers, Amazon’s leverage metrics — debt-to-EBITDA and interest coverage — stay conservative. The raise is not a distress signal; it is strategic flexibility in an arms race where first-mover advantage in AI infrastructure pays dividends for years.
What It Means for Others
The pressure is even more acute elsewhere. Oracle, for example, plans $40 billion to $50 billion in capex this year alone to fuel its cloud infrastructure and OpenAI partnership. The company is raising $45 billion to $50 billion total through a balanced debt-and-equity plan — roughly half via bonds early in 2026 — while already carrying heavy debt loads relative to its size. Smaller names such as Applied Materials face similar dynamics at lower absolute scales.
When even cash-rich giants repeatedly tap debt markets for ever-larger sums, investor jitters intensify. Bond spreads have widened modestly for tech issuers, and any slowdown in AI returns could trigger broader repricing. Contagion fears are not unfounded: if hyperscalers must keep borrowing at scale, higher interest costs could eventually crimp margins or force spending cuts.
Key Takeaway
Amazon’s latest debt issuance is unlikely to derail the company. Strong fundamentals, dominant market position, and rapid monetization of AI investments should generate returns that comfortably service the new obligations. The real story lies in the broader pattern. Hyperscalers and adjacent players turning to bonds and loans — often multiple times and in ever-greater amounts — signals a structural shift. What began as self-funded growth has become debt-financed expansion at unprecedented scale.
If AI delivers the promised productivity surge, today’s borrowing will look prescient. If returns lag or economic conditions tighten, this mounting leverage could weigh on the sector for years to come. For now, investors are betting on the upside. The bond market is simply keeping the lights on while the AI future gets built.
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