A new report from Moody’s Ratings points out that massive investments in AI infrastructure by global tech giants are fundamentally reshaping their traditional business models, shifting them from “asset-light” to “asset-heavy” and bringing a series of financial challenges, including surging capital expenditures, pressured free cash flow, and rising balance sheet risks.
Moody’s research report indicates that capital expenditures for six companies—Microsoft (MSFT), Amazon (AMZN), Google parent Alphabet (GOOGL), Meta (META), Oracle (ORCL), and CoreWeave (CRWV)—are projected to approach the trillion-dollar mark by 2027, with both direct debt and off-balance-sheet lease commitments having risen substantially. Although the credit ratings of leading firms remain stable in the short term, Moody’s emphasizes that investors will closely scrutinize whether AI outlays translate into reasonable returns, and that the industry’s financial structure is undergoing its most significant transformation since the cloud computing era. At the same time, the “circular ecosystem” formed by cloud service providers and AI startups, while resilient amid strong demand, could amplify systemic risks if demand falls short of expectations.
Moody’s expects the pace of AI infrastructure investment to continue accelerating. The combined capital expenditures of the six companies are set to reach approximately $785 billion in 2026 and are likely to approach the $1 trillion mark by 2027. Unlike traditional software businesses, generative AI imposes enormous demands for hardware such as data centers, GPU servers, and high-performance chips, fundamentally rewriting the path by which the tech industry has long relied on asset-light models to sustain high margins and robust balance sheets.
To support their massive AI expansion plans, tech giants are increasingly turning to capital markets. Moody’s data show that direct debt among the six large cloud service providers has now risen to about $460 billion. At the same time, companies are continuously supplementing capital through equity financing, with Alphabet having announced an $85 billion equity financing plan just last month.
In addition to debt and equity financing, a growing number of companies are adopting off-balance-sheet financing methods to alleviate direct pressure on their balance sheets. Given the substantial upfront outlays for AI hardware and infrastructure, coupled with relatively long revenue realization cycles, industry-wide free cash flow remains under sustained pressure. To address this, tech giants are extensively using long-term data center leases as a financing tool. To date, the total data center lease commitments of the six companies have climbed to approximately $1.2 trillion, with over $820 billion of the corresponding projects still under construction and not yet in service. Moody’s believes that while these lease commitments are not reflected on the books as traditional debt, they are essentially long-term liabilities equivalent to debt and will create substantial future rent payment obligations.
In addition, Moody’s highlights the increasingly apparent “circular ecosystem” risk within the AI industry chain. The report notes that large cloud service providers have poured billions of dollars into AI startups such as OpenAI and Anthropic in recent years, while these AI companies, in turn, heavily purchase cloud computing resources from Microsoft, Amazon, Google, and others, thus forming a closed loop of interdependent capital, customers, and infrastructure. This cross-shareholding and tight customer relationship means that the performance of industry leaders is increasingly tied to the same pool of AI clients and the core assumption of sustained AI demand growth. Should industry demand fall short of expectations, the associated risks could be amplified in tandem.
Despite these challenges, Moody’s believes that Microsoft, Alphabet, Amazon, and Meta currently still possess some of the strongest corporate balance sheets globally, and that the likelihood of near-term impacts on their investment-grade credit ratings is low.
