S&P Warns Big Tech Credit Ratings at Risk From AI Debt Surge

The world's largest technology companies are taking on unprecedented debt levels to finance AI infrastructure, and S&P Global is raising red flags about potential credit rating downgrades for these hyperscalers.

According to S&P Global, the financing arrangements backing data centers and AI-related infrastructure have grown both larger and more structurally complex. The credit ratings agency's adjusted debt metric — which accounts for company cash holdings, future lease obligations, and power purchase agreements — reveals mounting leverage across the sector.

Why it matters

The stakes extend far beyond Big Tech balance sheets. These companies are spending trillions of dollars on AI infrastructure, with much of that capital borrowed rather than generated from operations. This investment wave is currently driving significant U.S. economic growth. Any credit deterioration or financing disruption in this sector would ripple through the broader economy, affecting employment, supplier networks, and investor portfolios.

Trillion-dollar infrastructure buildout

The hyperscalers — typically referring to Amazon Web Services, Microsoft Azure, Google Cloud, and similar massive cloud providers — are in the midst of an infrastructure arms race. Data centers require enormous upfront capital for real estate, power systems, cooling infrastructure, and computing hardware before generating any revenue.

To fund this expansion, these companies are increasingly turning to debt markets. S&P's concern centers on whether the current pace of borrowing is sustainable given the uncertain returns from AI investments.

Complex financing structures raise concerns

S&P Global specifically highlighted the growing complexity of AI financing arrangements. Beyond traditional corporate bonds, companies are entering into long-term power purchase agreements to secure electricity for energy-intensive data centers and taking on lease obligations that represent future debt burdens.

These off-balance-sheet commitments can obscure the true extent of financial obligations. S&P's adjusted metrics attempt to capture this fuller picture, and the results suggest leverage is climbing faster than headline debt figures indicate.

Riskier business models emerging

The credit ratings agency also noted that some of the capital is flowing into riskier business ventures. As companies race to monetize AI capabilities, they're investing in unproven applications and business models where revenue generation remains uncertain.

This combination — massive debt, complex financing structures, and speculative investments — creates the conditions that historically precede credit rating downgrades. For companies that have long maintained top-tier credit ratings, any downgrade would increase borrowing costs and potentially constrain future investment capacity.

The warning from S&P Global was first reported by Axios, which noted the agency's concerns about maintaining pristine credit ratings amid the AI spending surge.