Major technology companies including Amazon and Alphabet are increasingly turning to debt markets to finance the enormous cost of expanding their artificial-intelligence infrastructure.

The Financial Times reports that U.S. investment-grade bond issuance has already exceeded $1.5 trillion this year, with technology companies accounting for a growing share of the largest deals.

The development marks a change from the traditional approach of major technology companies, which historically relied heavily on their large cash reserves to fund expansion.

The scale of AI investment has changed that calculation, as companies now need enormous amounts of capital to build data centres, purchase computing equipment and expand electricity capacity.

The Financial Times reports that around two-thirds of the so-called jumbo bond deals, worth at least $10 billion each, are now coming from Big Tech companies.

Amazon and Alphabet are among the companies borrowing heavily as they race to expand their AI capabilities.

The borrowing boom has also begun affecting the wider credit market. Because technology companies are issuing such large amounts of debt, their borrowing needs are becoming increasingly important to bond investors and financial institutions.

Analysts warn that this concentration could create risks if technology companies suddenly reduce spending or if investors become less willing to finance AI expansion.

For now, however, companies continue betting heavily on artificial intelligence.

The scale of borrowing demonstrates just how much money Amazon, Alphabet and other technology giants believe will be required to compete for leadership in the rapidly expanding AI economy.

Source: Financial Times