Whenever someone worries about how the hyperactive data centre investments of the AI hyperscalers are becoming increasingly financed by debt, optimists are quick to scoff.
They point out that these companies still have core businesses that generate a ton of cash, relatively little debt and strong credit ratings. Even if the data centres don’t produce the expected financial returns, it’s more of an issue for equity investors than lenders.
It’s a fair point. Despite the recent bond issuance splurge, hyperscalers have an average net leverage ratio of just 0.5 times, compared to 0.8 times for the technology sector as a whole, and 1.8 times for (non-financial) US companies in general, according to Morgan Stanley. Most eye-catchingly, they have more cash than debt.