Tech Giants' Debt Burden Rises as Goldman Sachs Forecasts $420 Billion in Issuance

Goldman Sachs has updated its forecast for global investment-grade debt issuance by major tech firms. According to the bank, this figure is expected to rise from approximately $400 billion in 2026 to $420 billion by 2027. This represents a significant increase of about 68% compared to last year's estimate.

The surge in debt issuance is primarily driven by the growing emphasis on artificial intelligence (AI) infrastructure. As companies invest heavily in AI, they are relying increasingly on debt financing to support their capital expenditures. In fact, Goldman Sachs estimates that around 35% of capital expenditures for major tech firms will be supported by debt, potentially reaching a staggering $1.2 trillion.

Amazon.com Inc is one such company that operates in the consumer cyclical sector and primarily focuses on retail. However, its reliance on debt financing amidst a cash-flow-negative status raises questions about the sustainability of its current valuation. Amazon's current Price-to-Sales (P/S) ratio stands at approximately 3.44, significantly above its historical median of ~3.4x.

The GF Score, which evaluates a company's financial strength, profitability, growth potential, valuation, and momentum, suggests that Amazon has strong performance across these dimensions. However, its financial strength is rated at 7/10, reflecting some concerns regarding its reliance on debt financing.