Alphabet and Other Big Tech Could Borrow Hundreds of Billions Each
The Takeaway
- Big Tech firms could borrow up to $200 billion each while maintaining credit ratings.
- AI investments are transforming Big Tech into more indebted companies.
- Credit ratings for tech giants appear safe for two years, but risks exist.
Amazon, Alphabet and Meta Platforms in recent months have each turned to the bond markets to raise tens of billions of dollars for their massive investments in AI data centers. And all three are likely to borrow much more in the next couple of years, with their projected capital expenditures now likely to come close to or surpass the cash they generate.
How much more can they borrow, without suffering a credit ratings downgrade and seeing their financing costs rise, is now a big question. Right now, credit agency S&P estimates all three will end up with a little more debt than cash by the end of this year, the reverse of the current situation. Longer term, however, the companies could each borrow close to $200 billion and still retain their credit rating, judging by S&P’s methodology.
Companies’ newfound emphasis on borrowings to fund expansion show how the AI boom will likely forever change the financial profile of the biggest tech companies. Instead of generating vast amounts of cash that allow for diversification into other businesses and giant stock buybacks, tech firms appear likely to be transformed into heavily indebted companies producing little free cash—at least for the next few years.
S&P and Moody’s calculate credit ratings by looking at the companies’ current debt and earnings alongside forecasts of how that ratio might change over time.
Right now, both agencies give Alphabet a higher investment grade rating than either Meta or Amazon: an AA+ or AA2. Meta has the lowest—AA- by S&P and AA3 by Moody’s. That reflects a belief among credit analysts that Meta’s reliance on advertising means it isn’t as diversified as Alphabet and Amazon—both of which have bountiful cloud businesses, among other lucrative parts of their operations.
Both credit agencies have indicated they don’t expect the tech companies’ credit ratings to change in the next couple of years. Jawad Hussain, director at S&P Global Ratings, says Alphabet’s AA+ rating, for instance, is probably safe until the company passes a threshold of one times debt-to-earnings before interest, taxes, depreciation and amortization. Right now, Alphabet has a ratio of zero, because it has more cash than debt.
Given that analysts estimate Alphabet will generate $216 billion in Ebitda this year, a one times debt to Ebitda ratio implies Alphabet would have roughly $200 billion of debt, after deducting cash on its balance sheet. At the end of 2025, the company had $46 billion debt and $126 billion in cash.
The company has projected it will spend about $180 billion in capital expenditures this year, however, absorbing most of the cash it is expected to generate. But Alphabet also is scheduled to complete its acquisitions of Wiz, a cybersecurity firm, and Intersect, a data center infrastructure company, costing it a combined $37 billion.
As a result, S&P predicts that Alphabet will end 2026 with $16 billion more debt than cash, translating to a debt to ebitda ratio of between 0.1 and 0.2 times. That assumes Alphabet finishes the year with total debt of $117 billion, including future data center leases, which S&P includes in its debt calculation. It assumes the company will finish the year with $102 billion in cash.
The agency’s latest forecasts don’t show any of the three companies—Alphabet, Amazon or Meta—exceeding a ratio of 0.5 times debt to ebitda in either 2026 or 2027. That implies its credit ratings are safe for a couple of years.
However, one risk for the companies is that S&P “might rethink” the downgrade threshold of one times debt-to-EBITDA, according to Hussein. It might do that if lower cash flows become commonplace or if S&P decides the companies are not reaping adequate returns on their AI investments.
Christian Hoffmann, head of fixed income at Thornburg Investment Management, said a downgrade for any of these companies is “certainly a possibility” given their planned increases in capital spending this year, though he added that “the cost of debt is not high and frankly, even if they carried a lower credit rating, it would still not be terribly high.”
Hoffmann acknowledged that while demand for tech company debt is “pretty high” right now, “at some point, I think people decide that they have had enough.” That would manifest itself in tech debt spreads—the gap between the interest costs on the bonds and Treasurys—widening.
One signal that this might be happening already is that the margin over the cost of Treasury notes on Meta’s credit default swaps, financial instruments akin to insurance on a company’s debt, has risen significantly over the last year.