A surge in hidden debt among AI giants like Oracle and Meta is setting off alarms in the industry. The hidden debt comes from future payment operations for expenses not yet online to make money. For instance, leases and property taxes must be paid on sites that are earmarked for databases that haven’t been built or completely built yet. The hidden debt amounts to more than $1.65 trillion.
The AI Illusion: Big Tech’s ‘Invisible Debt’ Surges To $1.65 Trillion On Opaque Funding – NDTV Profit– news.google.com
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EXCERPT:
The hidden $1.65 trillion stems from future payment obligations-such as long-term operating leases for data centers not yet built, bulk GPU supply contracts, and joint ventures. Under current accounting standards, companies are not required to record these obligations as liabilities on their balance sheets until the assets are delivered or the facilities go live.
Instead, these financial commitments are buried in the small-print footnotes of their financial statements. While perfectly legal, this practice effectively obscures the true financial leverage of the companies. By shifting costs to future periods, tech giants can maintain balance sheets and inflate current profit figures, all while locking themselves into hundreds of billions of dollars in future payouts.
While all five giants are utilizing these financial structures, the report reveals that the scale of hidden debt at Meta and Oracle is particularly striking:
Meta: The social media giant’s off-balance-sheet debt has reached an estimated $420 billion, nearly three times its officially recorded debt. A significant driver is its joint venture with Blue Owl Capital to build a massive data center in Louisiana, a project whose expected investment recently ballooned from $27 billion to over $50 billion.
Oracle: The company’s hidden debt has surged more than 30-fold in four years, reaching $273.3 billion. Much of this is tied to concentrated, single-counterparty exposure, such as its massive “Stargate” supercomputer data center project with OpenAI.
Meanwhile, Alphabet, Amazon, and Microsoft have collectively disclosed backlogs of roughly $1.45 trillion for cloud services and related business commitments as of March, according to the report.