Amazon, Alphabet Lead 'AI Debt Tsunami' Now Blamed for 20-Year-High Rates

Long-term interest rates have climbed to their highest levels in two decades, and hyperscaler debt issuance is emerging as a key culprit.

Apollo Global’s chief economist Torsten Slok flagged “hyperscaler issuance” as one of three main drivers behind 30-year Treasury yields sitting at a 20-year high, alongside inflation and fiscal deficits, in a recent note.

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Amazon.com Inc. (NASDAQ: AMZN ) and Alphabet Inc. (NASDAQ: GOOGL ) (NASDAQ: GOOG ) have led the borrowing spree over the past 12 months with Meta Platforms Inc. (NASDAQ: META ) and Oracle Corp. (NYSE: ORCL ) also ranked among the biggest issuers.

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Hyperscaler capital expenditures are projected at $650 billion to $800 billion this year and could exceed $1 trillion in 2027, a pace that has outstripped free cash flow for most mega-tech firms outside of Microsoft Corp. (NASDAQ: MSFT ).

Off-balance-sheet debt, including sale-leaseback structures on data centers, has reportedly swelled to $1.65 trillion, according to Nikkei Asia, further obscuring true leverage Goldman Sounds Debt Alarm Goldman Sachs sounded a similar alarm on July 20, noting that Microsoft, Amazon, Alphabet, Meta, Oracle, Nvidia Corp. (NASDAQ: NVDA ) and SpaceX (NASDAQ: SPCX ) collectively issued $244 billion in bonds this year — 14 times 2024 levels and more than double last year’s total.

Hyperscaler leverage ratios doubled from 0.9x to 1.8x in roughly six months, and the bond market’s pain threshold has shrunk from $75 billion to just $25 billion, according to Goldman.

Credit-default-swap spreads on major tech issuers have widened sharply as investors weigh whether AI investments will generate returns fast enough to service the new debt load.

Goldman singled out Microsoft and Alphabet for retaining “fortress” balance sheets and strong free cash flow, even as the broader AI ecosystem faces mounting strain.

The firm projects hyperscalers will spend a combined $5.8 trillion on AI infrastructure through 2030, a figure that will keep pressuring credit markets and, by extension, long-term Treasury yields for years to come.

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