There’s a lot more coming. Morgan Stanley expects big tech companies known as hyperscalers to spend about $3 trillion on data centers between now and the end of 2028, with roughly half of that likely financed through the companies’ cash flows. Credit markets will play a big role as an alternative source of funding for the other half, according to Andrew Sheets, global head of corporate credit research at Morgan Stanley.
“Most of this AI-related CapEx is still ahead of us,” Sheets said in an interview with Bloomberg on Thursday. “It’s only just starting to ramp up, so this theme will be with us for a while.”Technology firms are capitalizing on falling borrowing costs as the Federal Reserve cuts interest rates and investors race to lock in still-elevated yields. Meta is infusing artificial intelligence services into its key products, including Facebook and Instagram. The company said on Wednesday that it expects to spend as much as $72 billion on capital expenditure this year, and that its capital spending will grow considerably faster in 2026 than it will this year.
Meta’s shares fell as much as 14% on Thursday.
Other blockbuster deals from the tech sector include Oracle Corp.’s $18 billion high-grade offering last month. Banks are also preparing to launch a $38 billion debt offering that will help fund data centers tied to Oracle in what would be the largest such deal for AI to come to market, Bloomberg reported last week. The $27 billion private bond sale earlier this month is for a Meta project in Louisiana that will be 80%-owned by Blue Owl Capital Inc.
“Spreads are historically tight, so it isn’t a terrible time from their perspective to borrow,” said Scott Kimball, chief investment officer at Loop Capital Asset Management. “Investors need to look past the large amounts of cash and high equity cushions and focus on the ones who will prove the most successful.”Spending Aggressively
In the US high-grade market, Meta is looking to issue notes in as many as six parts, ranging from five to 40 years in length, according to a person familiar with the matter who asked not to be identified as they’re not authorized to speak publicly. The 40-year portion may yield about 1.1 percentage point more than benchmark Treasuries, after initial talk of about 1.4 percentage point, the person said.
The company is competing with top tech rivals, including Alphabet Inc. and Microsoft Corp., that are plowing vast sums of money into AI research. Artificial intelligence technology could boost productivity for workers in areas including law, accounting, and economics, and in a worst-case scenario, put many white-collar workers out of jobs.
Zuckerberg and Meta Chief Financial Officer Susan Li spent much of their earnings call on Wednesday working to convince analysts that Meta’s AI investments are paying off now — and will in the future — by helping the company better target ads and content. Revenue rose 26% to $51.2 billion in the third quarter, signaling that Meta’s core advertising business, which generates about 98% of that revenue, remains strong.
“We want to make sure we’re not under-investing,” said Zuckerberg on the call after posting third-quarter results.
Zuckerberg said that even if Meta develops too much computing power, the excess capacity could improve the core business. The company could also find a way to sell it, he said, the way rivals Microsoft and Google already do.
“I think that it’s the right strategy to aggressively front-load building capacity,” Zuckerberg said.
Meta is leading a seven-borrower docket on Thursday that includes Yankee banks HSBC Holdings Plc and NatWest Markets Plc. Citigroup Inc. and Morgan Stanley are managing Meta’s bond sale. Citi and Morgan Stanley declined to comment, while Meta didn’t respond to requests for comment.
