While the buzz around a possible SpaceX initial public offering and anticipated listings from OpenAI and Anthropic has stirred excitement on Wall Street, the current focus in the tech capital markets isn't on equity, but on debt. Major tech corporations, specifically Alphabet, Amazon, Meta, and Microsoft, are expected to spend nearly $700 billion this year on capital expenditures and finance leases to advance their AI projects, driven by unprecedented demand for computing power.
To support these massive investments, these tech giants may have to draw from their cash reserves accumulated in recent years. However, they are also increasingly turning to debt financing, raising concerns about a potential AI bubble and market risks if cash-intensive startups like OpenAI and Anthropic encounter growth slowdowns and reduce infrastructure spending.
A recent UBS report predicts global tech and AI-related debt issuance, which more than doubled to $710 billion last year, could reach $990 billion by 2026. Morgan Stanley projects a $1.5 trillion financing gap for AI developments, likely to be significantly filled through credit as companies are unable to self-finance their capital expenditures.
Chris White, CEO of the data and research firm BondCliQ, notes that there's been a "monumental" uptick in the corporate debt market, resulting in a substantial supply in debt markets. Leading corporate debt sales this year have been driven by Oracle and Alphabet, with Oracle announcing plans to raise $45 billion to $50 billion this year to build additional AI capacity. Oracle quickly sold $25 billion of debt in the high-grade market, and subsequently, Alphabet increased its bond offering to over $30 billion after a previous $25 billion debt sale in November.
Other major corporations are signaling potential future fundraising endeavors. Amazon, for instance, filed a mixed shelf registration last week, indicating intentions to possibly raise both debt and equity. Meta's CFO, Susan Li, revealed during an earnings call that Meta might use external financing to balance its cash flow, which could result in a positive net debt balance. Additionally, Tesla is considering outside funding options to support its infrastructure growth, as stated by CFO Vaibhav Taneja after the fourth-quarter earnings report.
As some of the world's most valuable companies significantly increase their debt loads, Wall Street firms remain active, eagerly awaiting IPO developments. Notably, there have been no significant IPO filings from U.S. tech firms this year, with much attention on Elon Musk's plans for SpaceX following its merger with AI startup xAI, creating a firm valued at $1.25 trillion. Speculation suggests SpaceX might aim for a public offering by mid-2026, though some, like investor Ross Gerber, believe Musk could merge SpaceX with Tesla instead. Meanwhile, OpenAI and AnthropicâAI labs valued in the hundreds of billionsâhave hinted at eventual public offerings, although specific timelines are not established. Goldman Sachs analysts recently projected 120 IPOs this year, with $160 billion in funding, up from 61 deals last year.
On the other hand, Lise Buyer of Class V Group, which advises pre-IPO companies, points out that tech isn't experiencing significant activity due to market volatility and geopolitical concerns. Particularly, the vulnerabilities surrounding AI within software markets and soft employment figures are some factors discouraging venture-backed startups from pursuing public offerings at this time.