Big Tech and the New Age of CapEx: Debt, Leases, and the AI Infrastructure Race
As the AI boom accelerates, global tech giants are facing unprecedented capital expenditure (capex) needs. The race to build AI-ready data centers and cloud infrastructure has pushed capex into record territory. Over the past six months, companies like Microsoft, Oracle, and Meta have begun shifting away from relying solely on cash, increasingly turning to debt and lease financing to support their infrastructure ambitions.
Microsoft: Leaning Into Leases
Microsoft’s capex hit $34.9 billion in its most recent quarter, up from $24.2 billion in the prior quarter. Significantly, about $11.1 billion (32%) of that spend came via finance leases, according to CFO Amy Hood. Microsoft is leveraging long-term leases for data centers, helping spread costs over time without impacting its AAA-rated balance sheet.
Rather than issuing new bonds, Microsoft is using operating cash flow and finance leases to fund its capex. It’s a strategic shift from its traditional cash-funded model and a sign of growing confidence in the long-term AI demand.
Oracle: Aggressive Debt Funding
Oracle has shifted dramatically toward debt to fund its AI infrastructure expansion. In September, it issued $18 billion in bonds, followed by an $18 billion project finance loan to fund its New Mexico data center campus. With free cash flow turning negative, Oracle’s net debt has ballooned past $104 billion, and ratings agencies have placed its outlook on watch.
These moves reflect Oracle’s urgency to deliver on major AI cloud contracts. Project-specific financing structures help fund the build-out without immediately overwhelming its balance sheet, but they represent long-term obligations that carry risk.
Meta: The Bond Market Beckons
Meta has long been cash-rich, but with AI capex forecasted at $70–72 billion for 2025, the company turned to public markets. In October, it raised $30 billion in bonds, the largest U.S. investment-grade corporate debt issue of the year. Meta also inked a $27 billion private infrastructure deal with Blue Owl Capital for its Hyperion data center.
The company now splits its capex financing across three sources: operating cash flow, public bonds, and private credit. With expected free cash flow compression, Meta is proactively preserving liquidity and managing leverage to retain its strong credit rating.
Alphabet and Amazon: Strategic Use of Debt
Alphabet, while sitting on over $100 billion in cash, issued $25 billion in bonds to support a revised $91–93 billion capex plan for 2025. Though still fully able to self-fund investments, the move signals a shift toward capital structure optimization amid large AI investments.
Amazon, returning to the bond market after a three-year hiatus, issued $15 billion in bonds to help fund an estimated $125 billion in 2025 capex. With AI fueling AWS growth, Amazon is balancing debt and operating cash to ensure flexibility.
Apple and Nvidia: Cash Still Rules
Apple remains an outlier, with a conservative $14 billion capex plan and no new debt for AI infrastructure. Its AI investments are smaller and focused on in-device applications, reducing the need for large external funding.
Nvidia, reaping massive AI chip profits, is self-funding its modest capex (~$6 billion/year) and reducing debt. Instead of borrowing, Nvidia is acting as a capital provider, financing GPU purchases for partners like CoreWeave.
Chinese Tech: Raising Capital Differently
Alibaba raised $3.2 billion via convertible bonds to expand its AI and cloud capacity. Tencent, while modestly increasing AI capex (~$12 billion projected for 2025), is using internal cash flow and avoiding major new debt. Constraints from U.S. chip export controls have kept spending in check.
Takeaways
· Debt is back: Big Tech issued over $120 billion in bonds in the past six months, a 4x increase over the prior annual average.
· Leases matter: Microsoft and Amazon are increasingly using leases for data center infrastructure.
· AI is driving it all: Massive infrastructure build-outs to support generative AI are straining even the most cash-rich firms.
With 2026 capex forecasted to exceed $600 billion, the shift from purely cash-funded investment to a hybrid model of cash, debt, and leases represents a profound change in tech’s financial playbook. Whether these bets on AI pay off will shape not only innovation but also corporate credit profiles for years to come.
