Alphabet Raised 60 Billion USD In Bonds In Four Months. Are Hyperscalers Getting Overextended?

 

Alphabet, the owner of the Google search engine is about to raise 60 billion USDs in bonds in the last four months. It raised the money not only in USD, but also in British pounds, Canadian dollars Swiss francs and Japanese yen.

Other hyperscalers like Meta, owner of Facebook have borrowed intensively to finance the huge capital expenditures in artificial intelligence, AI.

Amazon, Alphabet, Meta and Microsoft plan, taken together to invest in AI and cloud infrastructure, i.e. AI data centers and energy to power these data centers 750 billion USDs in 2026 alone according to their latest quarterly reports!

Much of the money will be borrowed.

No one from Amazon, Alphabet, Meta and Microsoft apparently wants to miss on the artificial intelligence, AI data center wave. Fear Of Missing Out, FOMO is rife in Silicon Valley. Apparently according to most of the leading technologists and technology investors it will be one winner to rule them all. Or at most 2.

The artificial intelligence, AI fourth industrial revolution will have many winners in hardware, software, energy infrastructure, according to Wolfteam Ltd.'s projections and estimates.

Amazon, Alphabet, Meta and Microsoft have fortress balance sheets with tens of billions of USDs of cash on them in each case.

However, the planned 750 billion USDs in investment is a huge sum of money and Amazon, Alphabet, Meta and Microsoft could easily run into hundreds of billions of USDs of debt which could threaten their operational excellence, namely to produce huge multi billions of USD of revenue and profit.

In end effect over-extension of AI investment could threaten the existence of Amazon, Alphabet, Meta and Microsoft if artificial intelligence, AI does not produce the envisaged benefits in productivity. A large increase in expected productivity could bring huge increases in revenue and profit for Amazon, Alphabet, Meta and Microsoft.

But this is only a rosy, positive assumption, expectation. If it does not come true or even comes true partially the very existence of Amazon, Alphabet, Meta and Microsoft could be threatened if they go on to burrow hundreds of billions of USDs.

One should bear in mind the non negligible probability of recession caused by let's say high oil prices, a new geopolitical conflict, a pandemic, banks bringing onto their balance sheets trillions of USDs of off balance liabilities, limit of chip technology production, sharp drop in technological productivity, etc.

All these events, if they cause a deep global recession will decrease by tens of percentages the revenues and profits of Amazon, Alphabet, Meta and Microsoft or even drive them in net losses, which could threaten Amazon, Alphabet, Meta and Microsoft's very existence.

But for nor, the positive and full of optimism artificial intelligence, AI train is going in full speed ahead. 

KKR Refunds 350 Million USD In Carried Interest

KKR, The New York-based alternative asset manager said it would refund $350 million in previously paid-out carried interest to investors in its second private equity fund in Asia.

This is the latest in a string of setbacks for the private equity and private credit industry.

The Tricolor, First Brands and Market Financial Services(MFS) bankruptcies have already caused a stir for the private credit industry.

Still, the private credit sector at 2 trillion USDs of assets under management seems big enough to absorb these shocks.

If the Federal Reserve does not raise interest rates abruptly and there is no AI technology bust, the private credit sector should weather the storm in 2 to 3 years.

Will Private Equity, Private Credit Recover Fast From The Recent Turmoil?

 

First Brands, Tricolor, Market Financial Services' sudden bankruptcies triggered a small run on leading private credit firms especially and private credit asset managers also like Blue Owl, Ares, BlackRock, Blackstone, Apollo etc.

Since there have been no other high profile bankruptcies of companies which took out high yield loans, it seems the private equity and private credit industry will recover from the shock in a year or so.

Provided that the AI boom does not turn to a bust or there is no other geopolitical or macroeconomic shock.

The recent redemptions from private credit funds staved off and the first quarter results of private equity and private credit firms were good. 

So private equity and private credit asset managers are on a recovery trajectory. 

Ares First Quarter 2026 Results

 

Ares Management Corp  wrote the following in its First Quarter 2026 Earnings Press Release:

 'GAAP net income attributable to Ares Management Corporation was $142.6 million for the quarter ended March 31, 2026. On a basic and diluted basis, net income attributable to Ares Management Corporation per share of Class A and non-voting common stock was $0.46 for the quarter ended March 31, 2026.

After-tax realized income was $452.4 million for the quarter ended March 31, 2026. After-tax realized income per share of Class A common stock was $1.24 for the quarter ended March 31, 2026. Fee related earnings were $464.4 million for the quarter ended March 31, 2026.'

Ares Management's stock price is down circa 40 % from its recent peak driven by the turmoil in the private credit business, namely the bankruptcies of Tricolor, First Brands Group and Market Financial Solutions.

Since private credit usually gives out credits with between 7 % and 15 %, even 20 % interest rates many a times to finance mid cap technology firms private equity buyouts, bankruptcies as Tricolor, First Brands Group and Market Financial Solutions are to be expected. This can not be called normal line of business, but given the inherent leveraged nature of private credit, especially when the private credit loans written are used to finance private equity buyouts, there are bound to be bankruptcies.

Circa 30 % or even more according to some analysts of the private credit loans are disbursed to technology, even artificial intelligence, AI related firms. Some of them loosely related as healthcare AI and energy related AI infrastructure.

If the AI boom does not turn into a bust defined by the Nasdaq Composite falling more than 62 % of its recent peak, private credit loans flows and private credit giants as Ares, Carlyle, Apollo, Blue Owl etc.'s stock prices should start to recover. 

A key risk to the AI trade are the coming high profile IPOs of ChatGPT, Anthropic and the combined SpaceX and xAI entity. It they are successful, there is the risk they will sap large scale capital from other AI technology firms. Both that or if the coming AI IPOs flop, could cause a large correction in the Nasdaq Composite and by extension the S&p 500, Dow Jones Industrial Average and most probably global stock markets.