Wall Street is starting to ask an uncomfortable question about the AI boom: what happens when the spending outruns the cash? Big tech companies AI debt loads are climbing fast, and two of the industry’s most aggressive spenders, Oracle and Meta, are now facing real scrutiny from credit markets over how they plan to pay for it all.
Key takeaways
- Oracle’s fiscal 2026 capital expenditure hit $55.66 billion, blowing past its own $50 billion target.
- Oracle is projecting up to $95 billion in capex for fiscal 2027, funded largely through debt and equity.
- S&P Global cut Oracle’s credit rating to BBB- in July 2026, one notch above junk, as its 5-year credit default swaps hit multi-year highs.
- Meta issued $30 billion in bonds in October 2025, its biggest debt sale of the year, and is separately financing a $12 billion Texas data center.
- Credit spreads on bonds from Meta, Alphabet and Amazon are widening as investors demand higher returns for the added risk.
Oracle’s Surging Capital Expenditures and Credit Challenges
Oracle spent far more than it planned to build out AI infrastructure last year, and its 2027 outlook suggests that pace isn’t slowing down. The company’s fiscal 2026 capital expenditure reached $55.66 billion, overshooting its own $50 billion target by a wide margin. That overshoot alone would raise eyebrows, but Oracle is now guiding toward a fiscal 2027 capex figure of up to $95 billion, a number that includes customer repayments and represents roughly a 70% jump year over year.
Fiscal 2026 Expenditure Overshoot
The gap between Oracle’s stated target and its actual spend is the first sign that AI infrastructure costs are proving harder to contain than projected. Overshooting a $50 billion budget by more than $5 billion in a single fiscal year is not a rounding error — it’s a signal that the scale of data center buildouts keeps expanding faster than internal forecasts.
Fiscal 2027 Expenditure Projection and Funding
To cover that projected $95 billion, Oracle isn’t relying on cash generated from operations. Instead, the company plans to raise nearly $40 billion through a mix of debt and equity in 2027, with a $20 billion equity issuance already announced. That’s a notable shift: rather than funding growth organically, Oracle is leaning on capital markets to keep pace with its AI ambitions.
Credit Rating Downgrade and Market Reactions
Credit rating agencies have already responded. S&P Global downgraded Oracle’s credit rating to BBB- in July 2026, citing elevated debt levels — a rating just one step above junk status. Around the same time, Oracle’s 5-year credit default swap rates traded at multi-year highs, a market-based signal that investors are pricing in more default risk than they have in years. Together, the downgrade and the CDS spike paint a picture of a company whose ambitions are starting to outpace its balance sheet comfort zone.
Meta’s Record Bond Issuance and AI Infrastructure Financing
Even a company as cash-rich as Meta is increasingly turning to debt to fund its AI buildout, and that alone tells a story about how expensive this infrastructure race has become. Meta issued $30 billion in bonds in October 2025 — its largest debt offering of that year — with proceeds directed toward data infrastructure supporting its AI projects.
Largest Debt Offering in October 2025
The size of that single bond sale underscores how much capital AI infrastructure now demands, even from a company generating substantial free cash flow through its core advertising business. When a firm with Meta’s balance sheet resorts to its biggest-ever bond sale, it suggests internal cash generation alone isn’t enough to keep up with the buildout timeline.
Project-Specific Financing for Texas Data Center
Beyond that broad bond sale, Meta is also pursuing financing tied to individual projects, including a $12 billion data center in Texas. This kind of project-specific financing is notable because it shows Meta isn’t just raising general-purpose capital — it’s structuring debt around specific pieces of infrastructure, a sign that the scale of individual builds has grown large enough to warrant its own funding arrangement.
Widening Credit Spreads in Tech Sector
Credit spreads on Meta’s bonds have been widening alongside those of Alphabet and Amazon, meaning bond investors are demanding higher yields to hold this debt. That’s a sector-wide signal, not just a Meta-specific one. When spreads widen across multiple hyperscalers at once, it typically reflects a broader repricing of risk tied to how much these companies are borrowing collectively, not doubts about any single balance sheet.
Implications of AI-Driven Capital Spending on Hyperscaler Debt
The pattern emerging across Oracle and Meta points to a structural issue for the industry, not an isolated corporate decision. AI-related capital expenditures are on track to exceed free cash flow for several major hyperscalers by 2027, according to the data underpinning both companies’ spending trajectories. That timing matters: it means the industry’s most aggressive AI spenders are approaching, or have already crossed, the point where internal cash can no longer cover the buildout.
Exceeding Free Cash Flow by 2027
Oracle’s a rise from $55.66 billion in fiscal 2026 capex toward a projected $95 billion in fiscal 2027 illustrates exactly this dynamic. That increase is funded substantially through new debt and equity issuance rather than organic cash flow, which is a meaningfully different financial posture than the one these companies operated under just a few years ago.
Shift from Organic Cash Flow to Debt and Equity Funding
Meta’s willingness to issue its largest-ever bond offering, combined with project-specific financing for individual data centers, reinforces the same conclusion: the financial demands of AI infrastructure are proving to exceed what even well-capitalized technology companies can sustain through their own resources. This matters for investors because it changes the risk profile of companies long viewed as balance-sheet fortresses. It also matters for the broader AI buildout, since the pace of infrastructure expansion is now tied not just to demand for AI products, but to how receptive bond and equity markets remain to funding it.
Sector-Wide Trends and Investor Concerns
The widening credit spreads across Meta, Alphabet and Amazon suggest investors are already adjusting their risk perception ahead of any further downgrades. Combined with Oracle’s rating cut and elevated CDS pricing, the picture forming across the sector is one where AI infrastructure spending is increasingly financed through markets that are starting to price in more caution than they did a year ago.
FAQ
Why was Oracle’s credit rating downgraded in 2026?
S&P Global downgraded Oracle’s credit rating to BBB- in July 2026, citing elevated debt levels linked to its rising capital expenditures.
How is Meta financing its AI infrastructure projects?
Meta issued $30 billion in bonds in October 2025 and secured additional financing, including $12 billion for a data center in Texas.
What is driving the increase in debt for major tech companies?
Heavy capital expenditures to build AI infrastructure, exceeding free cash flow, are pushing tech companies to rely more on debt and equity issuance.
How are credit markets reacting to tech firms’ increased debt issuance?
Credit spreads for Meta’s bonds and those of Alphabet and Amazon are widening, indicating investors are demanding higher returns due to increased perceived risk.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
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