More AI spending is being funded by debt, raising downturn worries

In short: Big tech companies are borrowing heavily to pay for AI buildouts, and some signs suggest investors may be reaching their limits.

What's going on

Large AI projects often need expensive data centers, chips, and power. More of that spending is now being paid for with debt, which is like taking out very large loans that must be repaid with interest.

Several reports and research notes point to record borrowing. Reuters said AI hyperscalers (the biggest cloud and data center operators) had issued about $220 billion in debt in 2026 as of August 10, based on BNP Paribas data. A June Reuters report added that AI-related borrowing was nearing 15% of all new U.S. “investment-grade” corporate debt, meaning bonds from companies seen as relatively likely to repay.

Other estimates are even higher. Goldman Sachs said nearly $500 billion of AI-related debt had been issued so far in 2026. An independent analysis from IESE estimated AI-related debt could be about 30% of net new U.S. investment-grade supply, and about 15% of the total investment-grade market.

The worry is not only the amount of borrowing. It is also timing. Companies are spending fast, but some projects may take longer to bring in cash, like building a mall before enough shoppers show up. Analysts have flagged risks like widening credit spreads (higher interest rates companies must pay), weaker ability to cover interest, construction delays, and pressure when old debt needs to be replaced with new debt.

What to watch

Reuters reported some investors are warning of market “indigestion,” meaning there may be more AI debt for sale than buyers want to absorb. Researchers and central bank watchers say the first clear warning sign would likely be stress in credit markets, not an immediate wave of defaults. Some analysts also note this is not exactly like 2008, since many early losses may sit outside traditional banks, which could reduce the chance of a classic banking crisis.

Source: NYTimes