AI buildout gets pricier
Big Tech’s push to build AI data centers is changing how investors think about the group. Companies that once sat on huge cash piles are now spending down reserves and borrowing more, which makes them more sensitive to interest rates and the bond market.
The biggest spenders show it most clearly. Amazon, Alphabet, Microsoft and Meta are projected to deploy a combined $750 billion this year, more than 80% above 2025. CNBC says a big share of that expansion is being funded with debt, and Nvidia, Oracle, Amazon, Alphabet and Meta are each turning to the debt market for tens of billions of dollars.
Why the rates matter
That matters because borrowing is no longer easy for the sector to ignore. CNBC reports that the Federal Reserve signaled the possibility of a rate hike in 2026, while the 10-year Treasury yield is trading near 4.45%. For companies financing long-term buildouts with debt, higher yields make new borrowing more expensive.
The pressure is not the same across the group. CNBC notes that Nvidia is still in a strong cash position, with free cash flow jumping past $48.5 billion in the latest quarter, up from $26.1 billion a year earlier. But Amazon is expected to post negative free cash flow this year, and Goldman Sachs says capex as a share of cash flow is at its highest level since the dot-com era.
