Tech companies are issuing more debt now than before the dot-com crash as a rapid infrastructure buildout unfolds in the AI boom, Moody’s Analytics Chief Economist Mark Zandi said in a LinkedInpost on Sunday.
Even after adjusting for inflation, big tech companies are issuing more bonds than during the late 1990s. And the companies aren’t just refinancing existing debt—they’re taking on additional debt.
“While the increasingly aggressive (and creative) borrowing by AI companies won’t be their downfall, if they do fall short of investors’ expectations and their stock prices suffer, their debts could quickly become a problem,” Zandi wrote. “Borrowing by AI companies should be on the radar screen as a mounting potential threat to the financial system and broader economy.”
The 10 largest AI companies, including Meta, Amazon, Nvidia and Alphabet, will issue more than $120 billion this year, Zandi said in a LinkedIn analysis last week.
And this time is different from dot-com era debt issuance, as internet companies back then didn’t have a lot of debt, he pointed out. Instead, they were funded by stocks and venture capital.
