US Tech Giants' AI Borrowing Threatens Eurozone Financing Costs

The European Central Bank (ECB) has warned that US tech giants' increasing use of debt markets to finance artificial intelligence investments could raise eurozone financing costs and increase credit risks.

According to an analysis by the ECB, companies such as Google, Amazon, and Microsoft, known as hyperscalers, are expected to spend up to $1 trillion on AI-related investments by 2028. This would require them to issue a significant amount of debt in bond markets around the world.

The current outstanding bonds issued by these companies in the eurozone market total around €40 billion, but they account for almost 10% of new gross issuance this year. The large volumes of new debt issued by technology corporations could test investors' willingness to buy such assets and raise borrowing costs across the market.

The ECB also warned that the credit ratings of major technology companies may be overly optimistic due to assumptions about future revenue growth and debt levels that may not materialize.