The End of AI Is Loans

In October, Bloomberg reported that Tencent was considering an offshore bond issuance of up to $5 billion. Tencent had already sold a $4.7 billion bond in June, the largest since 2020. According to Reuters, ByteDance obtained a $29.6 billion syndicated loan from 30 banks to fund AI investment. Alphabet issued $31.5 billion in bonds in February, and Amazon sold $37 billion in March, then raised about $25 billion more in July. Cloud companies have spent their free cash flow on GPUs and data centers. According to a prospectus obtained by Reuters, Anthropic plans to rent $125.2 billion of computing power over the next five years but does not have that much money. Broadcom lent it $42 billion. Nvidia and AMD have used similar tactics. Morgan Stanley estimated that global AI-related debt issuance reached about $450 billion by September this year, more than double the total for last year. According to internal OpenAI materials obtained by the FT, OpenAI projects revenue of $36 billion in 2026 and $350 billion in 2030, with cumulative revenue of $840 billion over 2026-2030. However, it expects to invest $856 billion in compute and infrastructure over the same period, leaving cumulative free cash flow of about -$278 billion. SoftBank issued $11.1 billion in bonds and funneled the proceeds into OpenAI. The bonds are rated BB+, below investment grade, with a top coupon of 9.75%. SoftBank has invested $64.6 billion in total to acquire a 13% stake in OpenAI. Oracle posted fiscal 2026 revenue of $67.4 billion and net income of $17 billion, but capital expenditures on data centers reached $55.7 billion, pushing annual free cash flow to -$23.7 billion. Oracle has budgeted $95 billion for capex in fiscal 2027 and has done three public bond issues since 2025, raising $50.7 billion in total.