Tech giants’ debt-fuelled AI spending has investors on edge amid bubble fears

Core Insights - Equity investors are increasingly worried about the leverage that major technology companies are taking on to develop their artificial intelligence infrastructure, raising concerns about a potential bubble in the industry [1][2] Industry Overview - Major technology companies are raising record amounts of debt to finance their AI initiatives, with a combined total of $108 billion in debt raised in 2025, more than three times the average of the previous nine years [7] - The trend of using leverage marks a departure from the past, where companies typically utilized their cash reserves for capital expenditures [2][5] Company-Specific Developments - Oracle has faced significant scrutiny after its stock soared following an $18 billion bond sale for AI spending, but has since dropped 40% as investors reassess its aggressive capital expenditures [8] - Oracle's forecast for capital expenditures is $35 billion for the current fiscal year, with negative free cash flow projected at $9.7 billion, expected to worsen in subsequent years [9][10] - Other major tech firms like Meta, Alphabet, and Amazon have also engaged in substantial debt issuance, with Meta issuing $30 billion, Alphabet $38 billion, and Amazon $15 billion [11] Market Sentiment - The current phase is characterized by increased volatility and risk, as investors demand stronger returns on investments amid rising leverage [3][12] - Despite the heightened leverage, there remains a generally positive outlook on megacap tech stocks due to their strong earnings growth and competitive positions, with 80% to 90% of planned capital expenditures coming from cash flows [13]