The recent correction in U.S. equities has been tied to a surprising source: Silicon Valley’s debt binge. Once known for funding expansion through robust cash flow, the largest cloud and AI platform companies are now tapping the bond market at unprecedented levels, raising questions about whether investors can absorb the supply.
$90 Billion in Bonds Since September
According to Reuters, the four hyperscale leaders—Alphabet, Meta, Oracle, and Amazon—have collectively issued nearly $90 billion in bonds since September. Alphabet raised $25 billion, Meta $30 billion, Oracle $18 billion, and Amazon $15 billion. Of the five tech giants, only Microsoft has stayed out of the market recently.
If Meta’s $27 billion financing deal with Blue Owl Capital is included, total debt issuance by hyperscalers this year exceeds $120 billion, far above the five-year average of $28 billion.
Market Impact
The sudden surge in debt financing has rattled investors. While leverage ratios remain low, the sheer scale of issuance has sparked fears of oversupply in the corporate bond market. Analysts warn that funds are flowing from equities into bonds, dampening enthusiasm for tech stocks.
Since early November, the Nasdaq Composite has dropped more than 6%, the S&P 500 is down 3.47%, and the Dow Jones Industrial Average has slipped 2.77%. The Philadelphia Semiconductor Index plunged over 11%, with individual names like AMD (-17%), Micron (-16%), and Microsoft (-7%) hit hard.
Debt Financing for AI
The bond rush is tied directly to AI infrastructure spending. Companies are racing to build data centers and secure computing power, with estimates from Sage Advisory projecting AI capital expenditures to reach $600 billion by 2027, up from $200 billion in 2024.
JPMorgan predicts U.S. corporate bond issuance could hit a record $1.8 trillion next year, while Goldman Sachs estimates tech bonds already account for more than a quarter of net supply. Investors are demanding premiums—Alphabet and Meta recently paid 10–15 basis points more than existing debt—to absorb the flood of new paper.
Balancing Risk and Capacity
Despite the concerns, analysts note that debt still represents only a fraction of total AI spending. UBS estimates 80–90% of capital expenditures will continue to be funded by cash flow. With leverage ratios below 1, most mega-cap tech firms remain well within safe borrowing limits.
Interestingly, Nvidia has gone the opposite direction, reducing its long-term debt from $8.5 billion to $7.5 billion this year. S&P Global even upgraded Nvidia’s outlook to "positive," citing strong revenue growth and cash flow.
The Bottom Line
The correction in U.S. stocks reflects investor unease over whether the bond market can handle the AI-driven financing boom. While fundamentals remain strong, the shift from cash to debt financing marks a turning point for Silicon Valley.
For investors, the message is clear: AI spending is entering deep waters, and the balance between stock valuations and bond supply will be a key driver of volatility heading into 2026.