Cash-Rich Amazon Borrows $12B: AI Arms Race Forces Tech Giants to Debt

Amazon.com Inc. (NASDAQ:AMZN) is preparing to raise approximately $12 billion through a U.S. corporate bond offering, according to a Bloomberg News report. The e-commerce and cloud giant filed for a six-part bond sale earlier this week without disclosing the size, signaling a strategic shift as it seeks to fund its aggressive expansion in artificial intelligence (AI) and data center infrastructure according to Reuters. This would mark Amazon's first major bond issuance since 2021, when it raised $18.5 billion to finance the acquisition of MGM according to Benzinga.

The move comes as Amazon's capital expenditures (capex) for AI and data centers are projected to surge toward $150 billion by fiscal year 2026, according to JPMorgan analysts. The firm's annual AI and data center capex is already nearing $78 billion, driven by investments in GPUs, networking, and power infrastructure to meet the explosive demand for cloud computing and AI services. JPMorgan estimates that the broader tech sector's AI-related capex will reach $450 billion annually, far outpacing organic cash flow and forcing companies to rely increasingly on debt financing.

Amazon's balance sheet, while robust with $84 billion in cash and marketable securities against $58 billion in debt, is under pressure from the capital intensity of its AI ambitions according to JPMorgan analyst Erica Spear. "Sustained double-digit capex intensity is beginning to compress free cash flow (FCF) conversion," noted JPMorgan analyst Erica Spear, highlighting the growing need for external funding to sustain growth according to Benzinga. The firm joins peers like Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL), which have raised billions in bonds this year alone.

The bond offering reflects a broader trend in corporate finance, where tech firms are increasingly turning to debt to fund innovation. JPMorgan forecasts that Big Tech will issue $1.5 trillion in new investment-grade bonds over the next five years, signaling a "generational shift" in how Silicon Valley capitalizes its growth according to Benzinga. For Amazon, the move is not a sign of weakness but rather a recognition of the AI arms race's financial demands. As one analyst put it, "When even the cash-rich start borrowing, it's clear the AI boom isn't just changing tech - it's rewriting the rules of corporate finance" according to Benzinga.

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