The race to build artificial intelligence infrastructure at a trillion-dollar annual clip is eroding the free cash flow and increasing balance-sheet risk at so-called hyperscalers, warned Moody’s Ratings.

In a research note released this week, Moody’s said that the spending surge is forcing even the world’s most cash-rich corporations like Alphabet and Microsoft to lean heavily on debt, stock sales and off-balance-sheet moves to fund their AI ambitions.

“Previously, these companies relied on asset-light structures centered on software, intellectual property, and scalable cloud services that required modest capital investment,” Moody’s said in the Wednesday note. “The transition from asset-light to asset-heavy models requires unprecedented levels of investment and capital raising.”

The moves “threaten credit quality” for the six companies tracked by Moody’s, which include Microsoft, Amazon, Alphabet, Meta, Oracle and CoreWeave, according to the report.

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