Apollo warns of rising debt risks among cloud giants
Private equity firm Apollo Global Management has warned that the debt obligations of major cloud computing providers supporting the development of artificial intelligence are becoming riskier. CNBC Top News reports, citing a note by Apollo chief economist Torsten Slok.
The cost of insuring risks is rising
According to Apollo, credit default swaps (CDS) on the bonds of hyperscalers — large companies that provide large-scale cloud infrastructure — are becoming more expensive. CDS are credit risk insurance contracts. Slok noted that the rise in the cost of these contracts cannot be explained solely by banks hedging new bond issuances.
In the economist's view, the market is reassessing the fundamental credit risks of hyperscalers. Among the factors, he named a debt-financed AI capital expenditure cycle, growing debt burdens, negative free cash flow, and uncertain returns from depreciating assets.
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According to Apollo's research, the gap between hyperscaler and bank CDS has widened from approximately zero to 60 basis points since October 2025. In Slok's view, this indicates increasing credit risk among technology corporations independently of bank hedging.
Company metrics
According to FactSet, Alphabet's debt-to-equity ratio is 13%, while its projected free cash flow is minus $25.7 billion. For Amazon, these figures are 23% and minus $30 billion, respectively. Meta has a debt-to-equity ratio of 34% and negative free cash flow of $25.7 billion. Microsoft's debt-to-equity ratio is estimated at 7.34%, while its free cash flow stands at $33.4 billion.
Paul Meeks, head of technology sector research at Freedom Capital Markets, believes it is too early to draw final conclusions. According to him, a significant expansion of hyperscalers' capacity is expected in 2027–2028, and their margins are beginning to improve.
