After a 1,000% AI Rally, the $1.65 Trillion Debt Binge Is the Real Risk

AI debt issuance and hyperscaler capex are rising together

The rally is still going, and that is precisely what makes the risk more acute.

When markets keep rewarding ambitious AI promises, it becomes easier to treat heavier borrowing as normal. $489 billion of AI-related debt has been issued this year, already above last year's pace, while leading hyperscalers posted $405 billion in capex in 2025. Goldman Sachs has also warned that debt will play a growing role in funding the AI buildout. That combination can reinforce a simple market narrative: bigger spending looks like strategic strength, even as companies lean more on capital markets.

That is where the debate splits. Bulls see current borrowing as a way to secure infrastructure leadership before competitors do. Bears see a faster shift toward financed growth that could be harder to sustain if returns take longer to appear. For now, sentiment still appears to favor scale first and scrutiny later.

Credit markets are already showing some strain

The tension is starting to show up in credit indicators. Oracle's five-year CDS was quoted at 215bps, while Alphabet has reported negative free cash flow in recent results. Those signals do not prove a broader breakdown, but they do suggest that the financing story is becoming more visible and more important.

If investors stop viewing large debt programs as a sign of confidence, the rerating could happen quickly. The same market behavior that turned borrowing capacity into a bullish signal can reverse once the focus shifts from ambition to service charges, cash-flow coverage, and the timing of AI-era returns.