But where’s that money coming from?
At this point, a major source is firms like Oracle, which has gone on an immense spending spree on A.I. data centers, increasingly selling bonds to raise the money. Oracle is not alone. Alphabet, Microsoft, Amazon and Meta are giant investors in data centers, too. (The industry jargon is “hyperscaler.) But their underlying finances are stronger than Oracle’s, and their expenditures have not landed them in the same level of trouble in the markets.
Microsoft, for example, has a Triple-A credit rating — better than the U.S. government’s. Whether Microsoft manages to retain that rating after its splurges on A.I. data centers remains to be seen. “Microsoft is starting from a much better place, financially, than Oracle is,” Mariya Entina, a portfolio manager for DoubleLine, the money management company, said in an interview. “It’s important to have enough information to be able to differentiate.”
These five companies combined are pouring more than $800 billion into A.I. investments this year, and plan to add more than $1.2 trillion in 2027, according to Morgan Stanley. To put that in context, as Robert Armstrong of The Financial Times noted, the U.S. military budget request for 2027 is less than that: $961 billion, according to the Congressional Budget Office.
Few people outside the markets have paid attention to what goes on behind the financial curtain for artificial intelligence. These big companies are able to categorize the money as an investment — a capital expenditure — and not as an expense. So under current accounting rules, the bulk of the spending has not yet counted against their gaudy earnings. That is helping to propel the stock market to new heights under rosy assumptions that A.I. will transform the world, and that the companies behind it will be making money.
With the notable exception of Oracle, which has borrowed aggressively for the last couple of years, most of these companies generated so much cash from their main businesses that, until recently, their spending on A.I. data centers barely weighed on the performance of their stock or on the solidity of their underlying finances.
