Moody's warns that the AI investment frenzy is impacting the financial stability of tech giants, with companies like Microsoft and Oracle facing pressure on free cash flow.

Glonghui July 25｜As global technology giants race to ramp up artificial intelligence infrastructure, Moody's Ratings has warned that the AI investment boom is eroding the free cash flow of major cloud service providers and increasing balance sheet risk. In the future, investors will pay closer attention to whether these companies can generate sufficient returns from massive AI spending. In a research report released this week, Moody's said that six tech companies—Microsoft (MSFT.US), Amazon (AMZN.US), Google parent company Alphabet (GOOGL.US), Meta (META.US), Oracle (ORCL.US), and CoreWeave (CRWV.US)—are shifting away from their earlier "asset-light" business model reliant on software, intellectual property, and cloud services, toward a "heavy-asset" model that requires large-scale construction of data centers and other infrastructure. Moody's pointed out that this transition requires unprecedented levels of capital investment and financing, and may weaken the credit quality of these companies. The agency expects that AI infrastructure investments will continue to rise, with capital expenditure across the six companies reaching about $785 billion by 2026 and approaching $1 trillion in 2027. The report highlights that, compared to traditional software businesses, generative AI demands enormous investments in data centers, GPU servers, and high-performance chips. This is causing a fundamental shift away from the asset-light model that has long underpinned high profit margins and strong balance sheets in the technology industry.