--- title: "AI investment sparks a debt frenzy, as tech giants leverage raises investor concerns" type: "News" locale: "en" url: "https://longbridge.com/en/news/266983164.md" description: "Tech giants are over-leveraging to build artificial intelligence infrastructure, raising concerns among investors. Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, stated that this marks a new phase in the AI story, accompanied by greater volatility and risk. NVIDIA's strong performance initially boosted tech stocks, which later fell as investors assessed the capital scale and profitability timeline of AI investments. Tech stock valuations have retreated, with the Bloomberg Technology Giants Index's price-to-earnings ratio dropping to its lowest level in two months" datetime: "2025-11-21T21:35:38.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/266983164.md) - [en](https://longbridge.com/en/news/266983164.md) - [zh-HK](https://longbridge.com/zh-HK/news/266983164.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/266983164.md) | [繁體中文](https://longbridge.com/zh-HK/news/266983164.md) # AI investment sparks a debt frenzy, as tech giants leverage raises investor concerns While the technology industry faces concerns about a bubble, stock investors are increasingly worried that large tech companies are over-leveraging to build artificial intelligence infrastructure. It's not new for large tech companies to invest heavily in AI, but the massive debt they are taking on is unprecedented. What worries stock traders is that this trend is starkly different from recent history, where companies typically used their large cash reserves to fund capital expenditures. The use of leverage and the cyclical nature of many financing deals have introduced risks that were not previously present. Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, stated, "I think this marks the maturation of the AI story and its entry into a new phase, which may be accompanied by greater volatility and more risks." The Nasdaq 100 index rose 0.8% on Friday. NVIDIA's stock fluctuated slightly throughout most of the day, with a significant jump in the afternoon. Just a few months ago, AI spending primarily came from a handful of companies with strong balance sheets and robust free cash flow growth. The situation has now changed, and the risk profile of the tech industry has shifted accordingly. This new dynamic was reflected on Thursday: tech stocks initially surged on the back of NVIDIA's strong performance, then sharply retreated as investors assessed the scale of capital needed to build an AI world and compared it to the timeline for profitability of these investments. "We see this ecosystem expanding to include companies like Oracle and CoreWeave, which have weaker balance sheets and more debt, and we are also seeing more interconnected, cyclical revenue relationships," Shalett said. "This interconnection among participants brings systemic risk." Investor unease has also led to a decline in the valuations of large tech companies. The Bloomberg Technology Giants Index's forward price-to-earnings ratio has fallen to its lowest level in over two months, aligning with the average over the past five years. According to data compiled from industry research, the five major companies burning cash in the AI sector—Amazon, Alphabet, Microsoft, Meta Platforms Inc., and Oracle—are projected to issue a record $108 billion in bonds by 2025, more than three times the average over the past nine years. Oracle's issuance is particularly noteworthy. The company's stock surged in September after it issued $18 billion in U.S. investment-grade bonds to ramp up AI spending, with several banks also launching a $38 billion debt issuance to finance data centers related to Oracle. However, after hitting an all-time high on September 10, the stock plummeted 40% as investors reassessed the impact of aggressive capital expenditures on its balance sheet and how it would finance its massive capital spending. The stock could record its largest monthly decline since August 2001. The five-year credit default swaps for Oracle, which reflect leverage risk, have surged to their highest level in three years Easterly EAB global macro strategist Arnim Holzer stated, "It is not surprising to see Oracle's CDS rising. These companies are investing huge amounts of money and committing to significant capital expenditures, part of which will be financed through debt. This does not mean Oracle's stock is worthless, but its volatility should increase." Oracle expects its capital expenditures for the current fiscal year to be $35 billion, most of which will be directed towards its cloud business. This spending has weighed on its balance sheet: after turning negative for the first time since 1990 last year, this year's free cash flow is expected to be negative $9.7 billion. The following two fiscal years are expected to continue to expand, reaching negative $24.3 billion by fiscal year 2028. S&P Global Ratings recently downgraded Oracle's rating outlook to negative, stating in a report dated November 6 that "the reason is the anticipated capital expenditures and the issuance of bonds to accelerate AI infrastructure growth will put pressure on its credit profile." But it's not just Oracle that is leveraging up. According to industry research data, Meta has issued $30 billion in bonds, Alphabet has issued $38 billion, and Amazon has also raised $15 billion. Bloomberg Industry Research senior credit analyst Robert Schiffman said, "We may just be at the beginning of AI capital expenditure construction, but this also means we might be in the early stages of balance sheet leveraging. I am concerned that this wave of issuance is likely just the beginning of larger-scale issuances in the coming years." ### Related Stocks - [NVIDIA Corporation (NVDA.US)](https://longbridge.com/en/quote/NVDA.US.md) - [C3.ai, Inc. 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