Barclays Brief Hyperscalers: Hypergrowth, higher risk
Nov 11, 2025
In this insightful discussion, Andrew Keches, Co-Head of U.S. High Grade Credit Research, shares his expertise on the rapidly evolving funding landscape for big tech. He explains how hyperscalers are shifting from cash-funded expansions to debt financing, revealing the implications for credit markets. The conversation touches on the overwhelming recent debt issuance, risks associated with private funding, and the differing outlooks between credit and equity investors regarding AI's future in capital-heavy sectors. A must-listen for anyone interested in tech finance!
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Every Industry Wants An AI Angle
- Andrew noticed AI's ubiquity while commuting and saw unexpected companies branding toward data centers, like steel and paint firms.
- That illustrates how broadly firms try to attach to AI even beyond core tech players.
CapEx Estimates Keep Rising
- Hyperscaler CapEx estimates are skyrocketing, reaching almost $400bn this year and projected over $600bn by 2027.
- Markets are excited but nervous because nobody knows the full cost or timing of AI's payoff.
From Cash-Funded To Debt-Funded
- Historically, hyperscalers funded expansion from huge free cash flows and buybacks/dividends left room to self-fund growth.
- Rising CapEx is thinning net cash after shareholder returns, prompting a shift toward external financing.