Alphabet, Amazon, Meta, Microsoft and Oracle are expected to spend about $800 billion on capital expenditure this year. Big Tech is preparing to spend huge amounts on AI. Capital expenditure, or capex, is money companies spend on things such as data centres, chips and other infrastructure.
The spending could rise even more next year. Much of this spending is linked to the race to build AI infrastructure and expand computing capacity. The same five Big Tech companies are expected to spend around $1.2 trillion next year, according to Goldman Sachs.
The bigger issue is the overall demand for capital. AI companies need huge amounts of money to build data centres, buy computing equipment and expand their infrastructure. That adds to the total demand for investment capital in the economy. This is happening when Americans are saving less. The US personal savings rate is currently close to a four-year low, meaning there is less household savings available compared with stronger savings periods.
US companies issued about $1.9 trillion in bonds through August, which was 30% higher than during the same period last year, according to data from the Securities Industry and Financial Markets Association (SIFMA). Global bond issuance by companies linked to AI has already crossed $400 billion this year. The current pace of global AI-linked bond issuance is equivalent to more than $500 billion for the full year, according to a quarterly report from the Institute of International Finance (IIF). American companies accounted for roughly 90% of global AI-linked bond issuance, according to the IIF.
US corporate borrowing has already jumped sharply this year. AI-linked companies are responsible for a large part of the global borrowing boom. The pace of AI-related borrowing could become even bigger. US companies make up most of this AI-linked borrowing. The borrowing has not yet become a major problem for Big Tech. So far, the huge amount of debt raised by technology companies has not clearly limited their ability to fund their AI plans. The investors buying the two types of bonds are also different. The wider corporate bond market has not suddenly taken over the global market.
Treasury bonds and bonds issued by hyperscalers tend to attract different groups of investors, according to Vishwas Patkar, Morgan Stanley’s head of US credit strategy, who spoke during an IIF briefing. The share of global bond issuance coming from nonfinancial companies has remained broadly stable, according to the IIF.
