The on-balance-sheet debt and lease liabilities of hyperscale cloud service providers have risen to approximately $770 billion, and their share of issuance in the US non-financial investment-grade bond market has surged from 2% in 2025 to 19% so far in 2026. This means that AI capital expenditures are impacting not only the cash flow of tech stocks but also the supply structure of the entire investment-grade credit market.
In the past, tech giants were primarily high-quality, low-leverage issuers in the investment-grade bond market, but they are now increasingly becoming a source of new bond supply. Morgan Stanley explicitly points out that as capital expenditures become increasingly reliant on debt, the economics of AI projects further depend on the cost of external capital.
If AI investment continues to increase and credit spreads widen, leading to higher project capital costs, the market will begin to demand higher returns on AI investments. Sophisticated investors will no longer focus solely on growth; return on invested capital and financing costs will receive greater attention.
