Tech Firms Borrow $500 Billion for AI Boom Sending Markets into Turmoil

Tech giants are rapidly borrowing to fuel the AI race, triggering ripples across global markets. After minimal borrowing in 2024, companies like Google, Meta, Amazon, and Microsoft have raised around $500 billion in debt since January to fund AI infrastructure. Goldman Sachs forecasts this could surge to $1.2 trillion by 2027, a historic shift akin to past industrial booms.

Investors are still eager to lend, but at much higher rates. Meta now offers over 7% annually, while riskier cloud data firms exceed 9%. This borrowing binge is even reducing demand for US Treasury bonds, pushing up borrowing costs for the government. The 10-year Treasury yield has hit 5.3%, its highest since 2002, fueled by inflation and geopolitical tensions.

Analysts warn of potential risks, including a sharper market correction if AI growth slows. The Bank of England recently highlighted this concern, while the Nasdaq dropped nearly 7% in July amid doubts. Oracle, with $125 billion in debt and shrinking cash reserves, is seen as a potential weak link that could trigger broader financial instability.