What happened
In a rare credit outlook report, S&P has issued a systemic warning to the largest hyperscale cloud providers, noting their combined capital expenditures are projected to surpass $7 trillion by 2030. The agency said this scale ties nearly half of U.S. private-sector economic growth to AI activity.
S&P identified two core concerns: the lack of quantified AI investment returns and increasingly complex circular financing structures. The agency explicitly named Amazon as facing a possible downgrade from its AA rating, while Oracle could fall into junk territory if downgraded.
The report said none of the six major hyperscalers have quantified their AI return on investment, forcing S&P to rely on a baseline assumption that the companies likely know what they are doing and that current investments will eventually generate returns.
Why it matters
This marks a shift in the AI capex debate from equity analysts and stock investors to the credit market, which is now pricing in hidden risks in AI infrastructure. Ratings agencies typically have access to more non-public information, yet even they are working without key ROI data.
The circular financing ecosystem described by S&P could amplify volatility if demand weakens. Interconnected structures like take-or-pay agreements, chip financing, and residual value guarantees mean a default by one player could ripple through others, even among investment-grade companies.
Key facts
S&P expects the top six hyperscalers' total capital expenditures to exceed $7 trillion by 2030.
S&P named Amazon as facing possible downgrade from AA, and Oracle as vulnerable to a fall into junk status.
None of the six hyperscalers have quantified AI investment returns in their disclosures, according to S&P.
S&P detailed circular financing among companies, including lease liabilities, power purchase agreements, and chip financing.
Oracle's index-eligible USD bond stock was cited at roughly $117 billion.
S&P noted Amazon could face AA rating pressure around 2027 if earnings do not improve or capex does not slow.
What to watch next
Watch whether Amazon's earnings or capital spending trajectory shifts before the projected 2027 rating pressure point, and whether S&P's committee makes any exception in its rating decision.
Monitor how markets react to any downgrade of Oracle, given its large dollar bond base and the potential move into high-yield territory.
Track whether hyperscalers begin to disclose AI ROI figures or adjust financing structures in response to S&P's warning.