Moody's warns of AI credit risks: Off-balance-sheet obligations of the five largest U.S. tech giants have increased eightfold in three years, soaring to $2.8 trillion.

Five U.S. tech giants have accumulated massive off-balance-sheet liabilities to support the expansion of artificial intelligence infrastructure, and their credit risk is being closely monitored by rating agencies.

According to a Moody's rating report, Amazon, Microsoft, Google, Meta and Oracle have a total of approximately $2.8 trillion in off-balance-sheet obligations related to AI, covering lease agreements, purchase commitments and guarantees, none of which are included in the companies' balance sheets.

This figure represents an explosive increase from $350 billion in 2023, reflecting the increased investment these companies are making in infrastructure amid the AI wave.

In a report, Moody's analysts David Gonzales and Alastair Drake noted, "What's worth paying attention to is not just the absolute numbers, but also the rate at which these commitments increase each fiscal quarter."

The five companies mentioned above are also among the most active issuers in the U.S. investment-grade corporate bond market this year. Moody's emphasizes that analyzing these off-balance-sheet commitments is crucial for assessing their creditworthiness.

All three types of liabilities have surged, with data center leasing exceeding one trillion yuan.

Structurally, all three types of off-balance-sheet obligations have shown a significant increase.

The leased value of data centers not yet built exceeded $1 trillion this year, an increase of more than 50% from $662 billion last year; purchase commitments—contracts for future purchases of goods or services—jumped from $528 billion to $1.57 trillion; and guarantees rose from $51 billion to $137 billion.

Moody's points out that the five companies follow current U.S. accounting standards in their accounting treatment, and since these obligations have not yet become current liabilities, they do not need to be included on the balance sheet. Furthermore, not all commitments will ultimately translate into actual cash outlays.

Off-balance-sheet commitments have become a risk signal.

Nevertheless, Moody's report emphasizes that the rapid expansion of these off-balance-sheet obligations reveals the financing pressure on tech giants to build AI infrastructure.

With data center demand remaining strong, these companies are racing to expand their computing power footprint, resulting in a continuous expansion of long-term financial commitments.

For investors, this trend means that it is difficult to fully assess the actual financial exposure of these companies using only traditional balance sheets.

Moody's report suggests that off-balance-sheet commitments have become a crucial variable that cannot be ignored when analyzing the debt repayment ability and credit quality of such hyperscale cloud computing and AI platform companies.

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