S&P Global, one of the world's major credit ratings agencies, is raising a red flag about the way Big Tech is funding its artificial intelligence expansion. The concern isn't the straightforward bonds issued by companies like Amazon, Microsoft, Alphabet, Oracle, Meta, and SpaceX. Instead, S&P is focused on what it calls “interconnected financing structures” that help pay for data centers and “neocloud” providers—companies that rent out AI computing power.
In these arrangements, tech giants may provide guarantees, long-term purchase commitments, or other forms of support that don't always show up as debt in their public filings. That means the true scale of their financial obligations could be larger than what investors see on balance sheets.
What S&P is worried about
At a London roundtable, S&P analyst Mark Habib said, “it is safe to assume that there is more (debt) out there that we are not seeing,” especially when deals aren't disclosed in detail or aren't rated by S&P. The timing is significant: S&P expects these firms to spend more than $7 trillion on AI and data-center capital spending from 2025 to 2030, and to run negative free cash flow—meaning they spend more cash than they generate—until at least next year.
Some bonds from AI infrastructure players, including Nvidia-backed CoreWeave, have traded at more stressed levels lately. That suggests investors are already pricing in some risk. However, S&P says it doesn't yet see a gap big enough to change ratings. But it flagged a trigger: if AI spending looks unsustainable, or if competition prevents revenues from catching up, rating outlooks could worsen.
Why this matters for bond markets
S&P's $7 trillion forecast turns off-balance-sheet AI support into a bond-market question. When a hyperscaler backs a data-center project indirectly, that promise can act like a contingent liability—a potential bill that becomes real if refinancing gets harder or a partner weakens. If it hits the balance sheet, leverage (debt compared with earnings) rises and interest coverage (how easily profits pay interest) falls.
Even the risk of that shift can push investors to demand a higher yield, widening credit spreads and raising the premium companies pay to issue new investment-grade bonds. And because these firms sit at the center of AI infrastructure funding, tighter terms for them can flow through to the broader data-center and compute supply chain. This is a key reason why copper demand from AI data centers has been a hot topic in commodity markets.
What it means for everyday investors
For most people, this isn't a reason to panic. But it's a reminder that the AI boom isn't just about exciting technology—it's also about massive spending and financial engineering. If you own bonds or bond funds, especially those with exposure to tech companies, it's worth understanding that some of these obligations may be hidden. If you own stocks, the risk is that a future debt problem could weigh on earnings or stock prices.
S&P's warning is a cautionary note, not a call to action. The agency itself says it doesn't see a need to change ratings yet. But it's a signal that investors should keep an eye on how AI spending is being financed. As inflation concerns persist and central banks watch for financial stability risks, the hidden debt in AI infrastructure could become a bigger talking point.
For now, the key takeaway is that the AI buildout is a double-edged sword: it's driving growth and innovation, but it's also creating financial obligations that may not be fully visible. Investors should stay informed and consider the risks, even as the technology continues to advance.
