New Delhi [India], July 24 (ANI): The rapid expansion of artificial intelligence (AI) infrastructure is entering a new phase as investors begin to focus on rising credit risks linked to massive spending by major US technology companies, according to a Jefferies report, which said hyperscalers are increasingly relying on debt to finance AI investments while questions over future returns are beginning to intensify.

The report said the upcoming earnings season for Microsoft, Amazon and Meta will keep AI capital expenditure under close scrutiny after Alphabet recently increased its 2026 capital expenditure guidance by another USD 15 billion to USD 195-205 billion. Combined capital expenditure by the four major hyperscalers is estimated at about USD 695 billion in 2026 and USD 870 billion in 2027, highlighting the scale of the AI investment cycle.

'If this is the backdrop it seems to GREED & fear that the questioning of the returns on AI capex... has now begun and could well intensify in the forthcoming earnings season,' the report said.

According to Jefferies, one of the biggest changes in the AI investment cycle is that hyperscalers are now funding a growing share of their spending through debt rather than cash. The report said the companies have issued USD 194 billion of investment-grade debt so far this year, making them the largest issuer in the US investment-grade debt market, while bond yield spreads for companies such as Amazon, Alphabet and Meta have widened.

The report also highlighted growing contractual commitments linked to AI infrastructure, noting that remaining performance obligations (RPOs) across Microsoft, Amazon, Alphabet and Oracle reached about USD 2.1 trillion at the end of the first quarter of 2026, up 184 per cent from a year earlier. It said these commitments have largely been viewed as evidence of demand supporting AI-related data centre expansion, but added that investors may increasingly examine the associated credit risks as the industry evolves.

Looking ahead, Jefferies said it remains uncertain which hyperscalers will successfully monetise their AI investments over the long term. At the same time, it noted that AI remains a long-term growth theme, saying demand for computing power is expected to continue rising even if investors become more selective about the pace and financing of future AI spending. (ANI)