AI debt fears ease ahead of Oracle, Alphabet and Amazon updates. Here's what to watch. — SkimNews
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- Meta announced a $95 billion stock offering on Monday, and the absence of the large bond deal investors had expected became "a direct catalyst for AI-related spread tightening," said Nuveen's Richard Cheng, whose team expected a bond sale shortly after earnings.
- Meta's credit-default swap spread remains 177% higher year to date and Amazon's has gained 129%, reflecting a surge in debt issuance and AI-sector free cash flows turning negative, even as bond yields stay elevated.
- Alphabet is expected by FactSet consensus to post third-quarter free cash flow of negative $2.3 billion on $55.2 billion of capital spending, while Amazon is expected to report negative $9.9 billion of free cash flow against $58.7 billion of capex — extending the negative readings both logged in the second quarter.
- Oracle holds its investor day Wednesday with $117 billion of long-term debt outstanding and an S&P rating of BBB-1, the lowest investment-grade tier above junk, while its bonds "are trading more like a high-yield credit," CreditSights' Jordan Chalfin said.
- S&P Global Ratings estimated in August that hyperscalers will have negative free operating cash flow in 2026 and 2027, and in September flagged that data-center leases and chip purchase commitments "aren't necessarily treated as debt" and are not fully transparent.
- Microsoft reports Wednesday without having issued any bonds to pay for its AI spending, and Richard Cheng said the repricing amounts to no credit crisis — the largest hyperscalers retain "exceptional credit profiles, strong cash generation liquidity" even as capex needs and debt supply point higher.
- Jordan Chalfin said the spread move is roughly 80% "driven by technicals and sentiment" rather than fundamentals and does not expect major new bond issuance around the hyperscalers' earnings reports, while Paul Meeks of Freedom Capital Markets read the elevated capex as evidence that AI spending "is required."
Why it matters: For tech-bond investors, Oracle's $117 billion of debt and BBB-1 rating — with bonds trading like high-yield — make Wednesday's investor day the sharper test than Alphabet's and Amazon's results. The live issue is the upward trajectory of AI capex and debt supply, not the hyperscalers' credit quality, which Nuveen calls exceptional.
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