Apollo warns cloud computing debt grows riskier amid AI spending

Investing.com -- Apollo Global Management said Wednesday that corporate debt from major cloud computing companies is becoming riskier as these firms increase spending on artificial intelligence infrastructure.

Credit default swaps, which are insurance contracts against bond defaults, have become more expensive for bonds issued by hyperscalers. Apollo chief economist Torsten Slok wrote in a note that the market is repricing hyperscaler credit fundamentals due to a debt-financed AI capital expenditure cycle with rising leverage, negative free cash flow and uncertain payback on depreciating assets.

The gap between hyperscaler CDS and bank CDS has widened to around 60 basis points from roughly zero since October 2025, according to Apollo's research. This suggests that hyperscaler credit risk is increasing independently, rather than as a result of dealer hedging of new bond issuances.

Apollo's warning comes after leaders of frontier large language models said over the weekend they want to slow the rate of advancements of their products due to safety concerns. This could have financial consequences for the cloud computing providers that run the LLMs.

According to FactSet, Alphabet has a forward debt-to-equity ratio of 13% and forward free cash flow of negative $25.7 billion. Amazon has debt-to-equity of 23% and free cash flow of negative $30 billion. Meta Platforms has debt-to-equity of 34% and free cash flow of negative $25.7 billion. Microsoft has debt-to-equity of 7.34% and positive free cash flow of $33.4 billion.

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