Amazon's $150 Billion AI Capex Surge Could Force Its First Big Bond Deal In Years

Core Insights - Amazon.com Inc. may soon seek Wall Street's assistance for funding, marking its first major bond issuance since 2021 when it raised $18.5 billion for the MGM acquisition [1] - Despite having a strong balance sheet with approximately $84 billion in cash and marketable securities against $58 billion in debt, Amazon's liquidity may not suffice for the anticipated surge in AI and data center spending, projected to reach $150 billion by FY26 [2][3] - JPMorgan forecasts that Amazon's capital expenditures (capex) will nearly double from $78 billion in FY24 as AWS ramps up investments to meet the growing demand for AI, contributing to a sector-wide capex nearing $450 billion [3][4] Industry Trends - The tech industry is expected to see a collective issuance of $1.5 trillion in new investment-grade bonds over the next five years, indicating a significant shift in funding strategies within Silicon Valley [4] - Analysts note that while hyperscaler cash flow has traditionally supported growth capital, the increasing intensity of capex is beginning to compress free cash flow (FCF) conversion [4] - Amazon has not engaged in borrowing since 2022, contrasting with peers like Meta Platforms and Oracle, which have raised substantial funds this year [4][5] Implications for Investors - A potential new bond deal from Amazon would not indicate financial weakness but rather highlight the substantial capital requirements driven by the AI boom, suggesting a transformation in corporate finance practices [5]