A drone view shows a data center at the Google Storey County Campus in the Tahoe-Reno Industrial Center in Sparks, Nevada, Oct. 9, 2026.
Daniel Cole | Reuters
After experiencing a period of volatility, concerns regarding artificial intelligence-related debt have shown signs of easing. However, upcoming financial reports from major tech companies are expected to test these markets further.
Oracle is set to host its Investor Day on Wednesday, while Alphabet and Amazon.com are scheduled to release their quarterly results after the market closes on Wednesday and Thursday, respectively.
Credit markets have been closely monitoring the influx of AI-related debt, though recent days have seen some relief. Meta Platforms‘s $95 billion stock offering announced on Monday has contributed to a reduction in credit-default swap (CDS) spreads, following their increase after reporting negative free cash flow in the third quarter. These spreads, which rise when investors perceive higher risk, had previously widened but are now stabilizing.
Investors anticipated Meta would soon launch a significant bond issuance post-earnings, but the lack of such an announcement provided immediate relief, said Richard Cheng, head of Nuveen’s investment-grade corporate sector team.
“The mere absence of the bond deal itself directly drives AI-related spread tightening,” he explained.
A credit spread reflects the yield difference between corporate bonds and Treasurys of similar maturity. Narrowing spreads indicate increased investor confidence in the issuer’s creditworthiness.
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Fears ‘overblown’
“Market movements in recent days suggest investors now see credit fears as overblown,” noted CNBC contributor Paul Meeks, head of technology research at Freedom Capital Markets. “These concerns, while not entirely absent, may persist as more companies release financial updates over the coming weeks.”
Despite the easing, credit default swap spreads for major AI-focused firms remain higher than a year ago due to increased debt issuance and negative free cash flows. Meta’s spread stands 177% higher year-to-date, while Amazon’s has risen 129%.
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Investor sentiment appears to align more with technical and market factors rather than fundamental shifts, according to CreditSights analyst Jordan Chalfin, who emphasized the role of broader market dynamics in these movements.
Earnings in focus
Alphabet and Amazon present key challenges for tech bonds as they update their capital expenditure plans and free cash flow projections. Microsoft‘s upcoming earnings also carry weight, though the company has yet to issue bonds to fund its AI investments.
Both Alphabet and Amazon reported negative free cash flow in Q2, and analysts expect this trend to continue. Consensus estimates from FactSet indicate Alphabet may report a Q3 free cash flow of -$2.3 billion with $55.2 billion in capital expenditures. Amazon is projected to post -$9.9 billion in free cash flow against $58.7 billion in capex.
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S&P Global Ratings projects hyperscalers will maintain negative free operating cash flow through 2026 and 2027.
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The critical focus, Cheng states, centers on investors’ primary concern: “The trajectory of capital expenditure guidance across the hyperscaler sector.”
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Meeks views elevated spending as evidence of robust AI demand, noting that hyperscalers have deemed such investments not only worthwhile but essential based on their internal analyses.
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Chalfin from CreditSights does not anticipate significant new bond issuances tied to earnings reports for hyperscalers. Oracle’s announcements, however, hold particular importance given its investment-grade rating of BBB- from S&P—the lowest tier above junk status among tech companies. The company has issued $117 billion in long-term debt, earning it the label of “most important IG tech credit” due to its closer trading dynamics resembling high-yield bonds despite its official rating.
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Off-balance sheet debt
Balance sheets may not fully capture the scope of AI-related obligations. S&P Global’s September report highlights complex off-balance sheet arrangements for data centers and chip financing, which remain underreported. “There are commitments for data center leases or chip purchase agreements not explicitly classified as debt,” explained Mark Habib, S&P Global’s digital infrastructure lead, during CNBC’s “Squawk on the Street.”
S&P aims to enhance market transparency regarding these commitments to provide a clearer picture of corporate obligations. While Oracle’s debt profile raises concerns, hyperscaler credit ratings remain above A, supported by diversified revenues and strong interest coverage. Nuveen’s Cheng emphasizes no current credit crisis, noting their robust cash generation and liquidity: “The market is not concerned about credit quality at this point—it’s focused on capex trajectories and debt supply, both trending upward.”
Correction: This story has been revised to reflect that Oracle’s investment-grade credit rating is BBB-, according to S&P. A previous version mischaracterized the company’s credit rating.
