For decades, Silicon Valley's business model was asset light. Industry growth was built on software products with minimal capex.

But AI has changed the playbook.

Data centers are consuming trillions in new investment, and debt is financing the surge.

The most important resource in the technology industry is compute.

Big Tech is racing to build data centers to handle exploding demand for AI products and services.

This means annual capex of the largest tech companies has tripled since 2024.

The surge in data center investment reflects a new reality: the physical assets that power AI, like land, electricity and chips, are critical business moats.

The investment wave is starting to weigh on cash flow.

As capex scales, it’s eating into Big Tech’s historically strong cash generation.

Aggregate free cash flow from hyperscalers is expected to decline by ~60% in 2026 (Bloomberg).

As data center capex grows, Big Tech is turning to the credit markets.

2025 saw an unprecedented surge in hyperscaler debt issuance, and 2026 is on track for more.

The largest hyperscalers issued $121B in corporate bonds in 2025, compared to an average of $28B between 2020 and 2024 (BofA Securities).

The growing AI debt does not mean a crisis is on the way. These are investment grade credits backed by the strongest businesses on earth.

But the surge reflects the increasing market concentration to the AI industry.

AI-related debt is now the largest segment in the investment grade market. Equity gains have been driven by the AI boom. The private market is jumping into data center and AI infrastructure deals.

The debt is manageable, but the widespread market dependency is what to watch.

Any growth miss or downturn will ripple throughout the debt and equity markets.

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