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A surprise $25 billion offering from Amazon lifts artificial intelligence borrowing towards $270 billion, yet thinning order books, wider yield concessions and shrinking free cash flow expose how far the cloud giants now lean on the bond market.
A $25 billion bond sale from Amazon, characterised by Bank of America as a surprise transaction, lifts the technology group’s borrowing to $92 billion over recent months. Across the wider market, artificial intelligence related debt now reaches approximately $270 billion over the same span, nearly double the $136 billion issued across the whole of the previous year. Hyperscaler bonds make up an estimated $194 billion of that total, and Abishai Financial Asia reads the sale as a marker of how sharply the sector’s funding needs have shifted.
The sale arrives only months after an earlier $37 billion offering, an interval Bank of America regards as unusually compressed. Amazon has signalled to underwriters that it intends no further issuance in the near term. Order books close at 2.5 times the amount offered, down from 3.2 times on that earlier deal and the softest cover for any hyperscaler since a comparable $30 billion sale from Meta late last year. To draw buyers into maturities ranging up to 40 years, the group concedes 18 to 21 basis points above comparable securities.
The individual deal sits within a broader repricing of technology credit, one that Morgan Stanley expects to lift annual artificial intelligence related issuance to $570 billion. The firm’s Director of Private Equity, Daniel Coventry, describes a sector that has, as he puts it, “moved decisively beyond operating cash flow and into the bond market as a standing source of finance,” a shift he believes warrants closer monitoring of aggregate exposure budgets. The five largest hyperscalers have together raised $121 billion in US corporate bonds over the past year, against an annual average of $28 billion across the preceding four years, a rise of 332%.
Amazon’s reliance on debt reflects an equally rapid rise in spending, with Web Services revenue reaching $35.6 billion in the most recent quarter. That marks a 24% increase on the same period a year earlier. Chief Executive Andy Jassy states publicly that the division faces greater demand than it can currently supply, with chip availability the binding constraint, even as the group directs $43.2 billion towards cloud and generative AI capacity in the opening quarter alone. Committed capital expenditure now stands at $200 billion, while trailing free cash flow has contracted to $1.2 billion from $25.9 billion a year earlier, with capital spending now absorbing 94.5% of operating cash flow.
Comparable pressures run across the sector, where Oracle has raised $27.7 billion over the past year and Meta has more recently arranged a $27 billion private credit facility with Blue Owl to fund a data centre campus in Louisiana. Alphabet, meanwhile, has placed the first 100-year bond from a technology issuer in decades. S&P Global warns that credit quality faces erosion should the anticipated recovery in cash flow fail to materialise. With Oracle already carrying a BBB rating on a negative outlook, Coventry observes that “an investment grade label alone is no longer a sufficient guide to the risk embedded in these balance sheets.”
The strain reflects a widening gap between what the cloud providers earn and what they spend. The five largest are on course to commit some $750 billion to capital expenditure, equivalent to 38% of revenue and set to approach $1 trillion within four years, even as quarterly operating cash flow of $26 billion sits against outlays of $44.2 billion. Rate expectations offer only a partial offset, with global investment grade credit currently yielding around 4.4%. Coventry maintains that “disciplined exposure management, rather than passive reliance on a rating, is the more defensible posture while issuance continues at this pace.”
Set against secondary markets where roughly $50 trillion of US corporate bonds trades barely $43.5 billion on an average day, the build out leaves institutional investors weighing resilience as closely as return. Hedging through credit default swaps has climbed sharply in recent quarters, even as secondary depth in the newest paper stays thin. Widening yield premiums and thinning cover point to a durable change in how that risk is priced, one that rewards active management of single issuer limits over confidence in a rating alone. Abishai Financial Asia reads the present wave of infrastructure led issuance as a test of capital discipline that is only beginning.
Abishai Financial Asia Pte. Ltd. (UEN 201016239E) is a Singapore based asset manager and research led partner in capital allocation. Its approach compounds capital in public markets through active equity selection, bottom-up research and disciplined rebalancing, supported by overlay tools such as systematic tilts, opportunistic hedging and drawdown aware controls. Governance rests on macro aware risk budgeting, with explicit limits, concentration and liquidity guardrails, stress testing and transparent attribution. Environmental, social and governance factors are embedded wherever financially material, and the firm is exploring compliant structures that could, subject to suitability, extend selected solutions to retail qualified investors over time. Further information is available at https://abishai.com; media enquiries may be directed to Peng Joon at p.joon@abishai.com.
