Why Big Tech is Borrowing $1 Trillion While IPOs Vanish

If you own Tesla stock, pay attention to what Elon Musk just said about funding. The company may seek outside financing "whether it's through more debt or other means." Tesla isn't alone. Google, Meta, and Amazon are all lining up to borrow massive amounts of money.

The question isn't whether they can afford it—it's what happens when everyone wants to borrow at once.

The $700 Billion Shopping Spree

Tech's four hyperscalers—Alphabet, Amazon, Meta, and Microsoft—are projected to spend close to $700 billion this year on capital expenditures and finance leases for AI infrastructure. That's not a typo. It's the largest coordinated investment in computing infrastructure in history.

Even cash-rich giants can't self-fund this scale of spending. UBS estimates global tech and AI-related debt issuance more than doubled to $710 billion last year and could soar to $990 billion in 2026. Morgan Stanley sees a $1.5 trillion financing gap that credit markets will need to fill.

Google led the charge this week, upping its bond offering to over $30 billion after raising $25 billion in November. Oracle announced plans to raise $45-50 billion this year and immediately sold $25 billion worth of debt. The appetite seems insatiable.

Where Did All the IPOs Go?

Here's the irony: while debt markets are booming, the IPO market remains virtually frozen. There haven't been any notable U.S. tech IPO filings this year. All eyes are on what Musk will do with SpaceX, now valued at $1.25 trillion after merging with his AI startup xAI.

Goldman Sachs predicts 120 IPOs raising $160 billion this year, but industry insiders aren't convinced. "It's not that appetizing out there right now," says Lise Buyer of Class V Group, who advises pre-IPO companies. Software stock volatility, geopolitical concerns, and soft employment numbers are keeping venture-backed startups on the sidelines.

That's bad news for venture capitalists who've been waiting for an IPO resurgence since the market shut down in 2022. Last year saw just 31 tech IPOs in the U.S.—more than the previous three years combined, but far below 2021's 121 deals.

The Concentration Risk Nobody's Talking About

Big Tech's debt binge is creating a new problem: concentration risk in corporate bond indexes. Tech now represents about 9% of investment-grade corporate debt indexes, and Janus Henderson's John Lloyd sees that reaching the mid-to-high teens.

"These are tremendously profitable cash flow generative businesses," says Bailard's Dave Harrison Smith, "but the sheer amount of investment and capital being required is quite simply eye-popping."

The ripple effects are already visible. BondCliQ's Chris White warns that massive tech debt issuance will force other companies to pay higher yields. "It will cause much, much higher corporate debt financing across the board," he says, pointing to automakers and banks as particularly vulnerable.

The Bubble Question

Google's recent bond sale was reportedly five times oversubscribed, with yields barely higher than Treasuries. Investors aren't demanding much compensation for risk—yet. But what happens if cash-burning AI startups like OpenAI and Anthropic hit a growth wall and pull back on infrastructure spending?

The debt market's enthusiasm assumes AI demand will justify these historic investments. But with IPO markets still skeptical and venture returns under pressure, someone's math might be wrong.