Moody's says 'unprecedented' AI spending threatens credit quality of Amazon, Meta, Alphabet and others - CNBC

What the report says

CNBC reported that Moody’s Ratings is warning the rapid buildout of artificial intelligence infrastructure is weakening free cash flow and adding balance-sheet risk at major cloud and technology companies. In a research note released this week, Moody’s said companies including Microsoft, Amazon, Alphabet, Meta, Oracle and CoreWeave are moving from relatively capital-light software and cloud models toward much heavier spending on data centers, servers and AI chips.

According to CNBC’s account of the Moody’s report, the ratings firm expects capital expenditures by the six tracked companies to reach $785 billion in 2026 and about $1 trillion the following year. Moody’s said the companies are increasingly using direct borrowing, equity issuance and off-balance-sheet financing to support that spending. CNBC reported that direct debt across the group is about $460 billion, while lease commitments, largely tied to data centers, have grown to $1.2 trillion, including more than $820 billion for facilities not yet in service.

Moody’s said those obligations could pressure credit quality, even though Microsoft, Alphabet, Amazon and Meta still have some of the strongest corporate balance sheets globally and are not seen as facing immediate threats to investment-grade ratings. CNBC noted that pressure is more acute for lower-rated Oracle, which Moody’s rates Baa2 with a negative outlook, and CoreWeave, which is rated Ba3 in the high-yield category.

The report also flagged risks from circular business relationships in AI, where tech firms invest in AI labs that then buy cloud services from the same companies. Moody’s said investors are likely to scrutinize whether the enormous spending ultimately produces adequate returns.