Amazon, Google, Meta, Microsoft, and Oracle are increasingly funding their operations through debt, according to Bank of America analyst Yuri Seliger. This year, these five “hyperscalers” have issued $121 billion in debt, including $27 billion alone to fund Meta’s new data center in Richland Parish, La., Seliger said in a research note dated Nov. 17. Amazon also issued $15 billion in new debt on Nov. 17.
To put that $121 billion in perspective, it’s more than four times the average level of debt ($28 billion) issued by these companies annually over the previous five years, per this Bank of America chart:
The sudden influx of these investment-grade (IG) corporate bonds into the market has increased their “spread,” Seliger said in the note: the gap between the interest yield on bonds from these companies, compared with a risk-free rate or the market as a whole. The yield on Oracle’s debt has increased by 48 basis points (0.48%) since September, the note said.
“Not surprisingly, this deluge of supply has widened hyperscaler spreads materially. From Sep 1st to Nov 14th, spreads are +48bps wider for ORCL, +15bps wider for META, and +10bps wider for GOOGL. That’s 27%-49% wider, significantly underperforming the overall IG index,” he wrote.
