Concerns surrounding AI debt have lessened somewhat, particularly after Meta Platforms announced a $95 billion stock offering, which helped reduce its credit-default swap spreads. Despite this, spreads remain elevated due to a significant increase in debt issuance and negative free cash flows across the AI sector.
Analysts expect Alphabet to report a negative free cash flow of -$2.3 billion while spending $55.2 billion on capital expenditures, and Amazon is projected to report -$9.9 billion in free cash flow against $58.7 billion in capex. The outlook on capital expenditure guidance from these hyperscalers is crucial for investor confidence.
Oracle's upcoming Investor Day is also significant, as the company holds $117 billion in long-term debt and is at risk of losing its investment-grade credit rating. The market is currently focused on the trajectory of capex needs and the supply of debt, both of which are expected to increase, indicating ongoing investor concern despite a lack of a credit crisis