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Debt funding for AI capital expenditures will remain healthy at least until 2028, Apollo Global Management president Jim Zelter said.
This year, net origination of investment-grade debt will be “north of $1 trillion” and will “exceed net issuance versus the US Treasury market,” Zelter told Yahoo Finance at the Milken Institute conference on Monday (video above).
“And if you think about that $800 billion [in hyperscaler capex], a portion of it will be funded by the cash flow of these companies. A few hundred billion will be funded by the public investment-grade markets. And our stance is private investment-grade capital will be the third leg of that funding stool,” Zelter added.
“It’s going to take all the markets, it’s going to take the equity market, operating cash flow, the public [investment-grade] market, and the private [investment-grade] market for those kinds of numbers to come through,” he said.
By the numbers: 2026 will go down as the year of the upside surprise on AI capital expenditures. Consensus forecasts for hyperscaler capex in 2026 have risen by nearly $80 billion since the start of the earnings season, Goldman Sachs strategists said in a new note on Monday.
The five largest hyperscalers — Amazon (AMZN), Google (GOOGL, GOOG), Meta (META), Microsoft (MSFT), and Oracle (ORCL) — are expected to spend $751 billion in capex in 2026, representing 83% growth versus 2025. This estimate compares with $673 billion at the start of the current earnings season and $546 billion at the beginning of 2026.
Recent debt deals: Oracle announced in February a plan to raise $45 billion to $50 billion, split between a one-time bond issuance and an "at-the-market" equity program. The money will be used to expand its cloud infrastructure for clients such as Nvidia and OpenAI (OPAI.PVT). Meta followed in May with a $25 billion six-tranche bond sale to support its Louisiana data center and broader AI expansion. Alphabet also tapped the markets, issuing $31.1 billion in senior unsecured notes in the first quarter.
This shift marks a fundamental transformation in tech finance as these key players move away from pure cash flow funding to issuing longer-term debt to support AI infrastructure.
Bottom line: Equity investors may be getting frustrated by how much the hyperscalers are spending to fund AI infrastructure. But the debt markets haven’t been spooked yet and are willing to fund these deals at reasonable interest rates.
And that’s a good thing to see, because the last thing you want is a jittery debt market at the same time as spooked tech investors.
Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.
Brian Sozzi is Yahoo Finance's Executive Editor and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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