Big Tech's New Playbook: Cheap Debt for Expensive AI
Meta just priced $30 billion in bonds, and the order book ran roughly four times the supply. That happened on the same day its stock fell more than 11% after earnings. The signal is clear: bond investors still want mega-cap tech paper, even as equity holders flinch at AI spend.
The proceeds fund AI infrastructure-data centers, GPUs, and the backbone needed to keep pace. Maturities run decades, giving Meta long runway while it scales throughput and model performance. For corporate finance folks, this is classic asset-life matching and a way to protect cash on hand without stalling growth projects.
Why borrow if you generate massive cash?
"Zuckerberg seems like he's got no limit in terms of his spending," said CFRA Research senior equity analyst Angelo Zino. He also pointed out Meta's +$100B annual revenue and low default risk, while noting management can't pour every dollar of free cash flow into AI. Expect Google and Microsoft to consider similar financing as capital needs rise.
The equity market's message was caution on spend; the bond market's message was comfort with credit. That split is typical when capex surges ahead of visible returns.
Bond market read: quality, duration, collateral
Byron Anderson, head of fixed income at Laffer Tengler Investments, dismissed the idea that demand was fear-of-missing-out. "People want good quality names at attractive levels," he said. Even with corporate yields near decade lows, spread and carry from investment-grade tech still screen well for many portfolios.
Much of this new debt is tied to physical assets-data centers and high-value GPUs. Meta also set up a joint venture with Blue Owl Capital to raise about $27 billion for data center construction, reinforcing an asset-backed approach that lenders like. Learn more about the firm at Blue Owl Capital.
The equity-credit split in one quarter
Meta's stock sold off on spending fears and a one-time charge tied to US President Donald Trump's "Big Beautiful Bill." Strip that out, and net income would have been $18.6 billion for the quarter-more than General Motors, Netflix, Walmart, and Visa combined. Credit buyers are looking at scale, cash generation, and asset backing; equity holders are focused on payback periods and margins.
Oracle's move and a growing supply pipeline
Oracle reportedly raised $18 billion last month and is poised for another $38 billion via banks. Meta's success will likely embolden more mega-cap issuers to tap credit markets while rates are favorable. For portfolio managers, that means a steady stream of size deals, potential concessions, and selective opportunities along the curve.
What finance leaders should watch
- Supply: Expect more multi-tranche, long-duration issuance from mega-cap tech. Track concessions, new issue premiums, and secondary performance.
- Asset-backed angles: More collateralized structures tied to data centers and GPUs. Underwrite asset values, depreciation schedules, and recovery assumptions.
- Coverage and leverage: Monitor interest coverage and FCF after AI capex. Pay attention to covenant-lite nuances and secured vs unsecured mix.
- Rate path: The US Federal Reserve has eased the cost of borrowing. Policy guidance remains a key input for duration bets. See Fed monetary policy.
- Equity-credit divergence: Equities may stay volatile as spend ramps; credit can still look attractive on quality and scale.
- Startups: OpenAI, Anthropic, Perplexity and peers are likely to stick with equity financing. Without durable profits, debt pricing is punitive.
Portfolio positioning (high level, no advice)
Investment-grade tech at the long end can work if you expect stable or lower rates, but heavy issuance may nudge spreads wider near term. A ladder across the belly and long end helps manage reinvestment and curve risk. Keep an eye on realized AI monetization to validate today's capex.
For corporate treasurers, consider striking while the window is open. Match maturities to the life of data center assets, explore JVs to share capex, and balance bond vs bank funding to protect flexibility.
Key catalysts next
- Potential issuance from Google and Microsoft; follow-on waves from Oracle.
- Datacenter JV structures and the collateralization of GPU inventories.
- Spread moves for mega-cap tech versus industrial IG peers.
- Any policy changes that create one-time charges or shift tax treatment.
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