The Era of AI Borrowing: Amazon Raises 17 Trillion Won Through Bond Issuance

FT: "For AI Infrastructure Investments and More"
Capital Expenditures Expected to Exceed $147 Billion Next Year
Major Big Tech Firms Expand Borrowing for AI Investments

Jeff Bezos, founder and CEO of Amazon. Photo by AP News Agency

As major U.S. big tech companies continue aggressive borrowing to invest in artificial intelligence (AI) infrastructure, Amazon is reportedly raising over 17 trillion won through a corporate bond issuance.

The Financial Times (FT) reported on the 17th (local time), citing sources, that Amazon has decided to raise approximately $12 billion (about 17.6 trillion won) by issuing corporate bonds for purposes including AI infrastructure investment. This marks the first time in three years since November 2022 that Amazon has raised funds through a bond issuance.

Amazon is expected to use the funds for a variety of purposes, including acquisitions, capital expenditures, and share buybacks. A significant portion is anticipated to be allocated to AI infrastructure investments for its cloud services. Although Amazon, which operates Amazon Web Services (AWS), is the global leader in the cloud sector, competition is intensifying with Microsoft Azure and Google Cloud.

According to analyst forecasts cited by Bloomberg News, Amazon’s capital expenditures next year are expected to exceed $147 billion, which is three times larger than in 2023. Earlier this month, the company signed a $38 billion, seven-year contract to supply OpenAI with computing infrastructure equipped with hundreds of thousands of Nvidia graphics processing units (GPUs).

Major big tech companies are increasing their borrowing through corporate bond issuances to fund AI investments. Earlier this month, Google’s parent company Alphabet issued $25 billion in bonds, while Meta raised $30 billion in October, the largest amount this year. Oracle also issued $18 billion in September.

Global investment bank JP Morgan Chase projected in a report that, with the increase in bond issuances for AI investments, the U.S. 'investment grade (IG)' bond market could reach a record $1.81 trillion next year, surpassing the previous all-time high of $1.76 trillion in 2020. Of this, technology companies are expected to issue $252 billion, a 61% increase compared to this year.

However, FT pointed out that market analysts are warning this trend could flood the bond market and introduce new debt risks for credit investors.

Meanwhile, on Wall Street, there are growing concerns that the AI investment boom among big tech companies is overheating. Michael Burry, who inspired the film "The Big Short," recently argued that the current AI frenzy resembles the dot-com bubble of the late 1990s, raising the prospect of an AI bubble. He is a short-seller who predicted the 2008 financial crisis and earned massive profits.