US Tech Giants' Off-Balance-Sheet Commitments Hit $3 Trillion, AI Spending Exceeds CapEx
Nine major US technology companies have accumulated approximately $3 trillion in off-balance-sheet commitments, largely tied to AI, growing faster than traditional capital expenditure. Their disclosed capex over the past year totaled about $600 billion, while future AI-related off-balance-sheet obligations are roughly three times their existing leases and long-term debt. These commitments include leases, purchase agreements, and equity investments, raising concerns about total leverage and financial sustainability.
Nine major US technology companies hold approximately $3 trillion in off-balance-sheet commitments, most of which are AI-related. These obligations are growing faster than traditional capital expenditure. The companies disclosed about $600 billion in total capital expenditure over the past year, while their future AI-related off-balance-sheet obligations are roughly three times their existing leases and long-term debt.
These leading tech companies are making such massive investments based on their projections of AI computing demand and hardware supply over the coming years. They expect that as AI becomes embedded in Americans' lives and work, future revenue will comfortably cover these bills. However, if their assumptions about technology and demand prove wrong, the agreements signed to secure future capacity could become an unbearable burden for the companies and their investors.
Meta's giant data center project "Hyperion" in Louisiana, spanning an area equivalent to about 1,700 football fields, illustrates why tech companies accumulate such large off-balance-sheet obligations. These agreements to secure future computing power are not fully reflected on balance sheets. Meta initially agreed to lease the Hyperion data center for four years starting in 2029, with an option to extend up to 20 years. If Meta does not fulfill the entire 20-year lease, it has committed to compensating bondholders for losses.
Under accounting rules, Meta's Hyperion lease obligation remains off-balance-sheet until rent payments begin. The company said its initial total lease commitment is approximately $12.3 billion. Meta disclosed that as of June, non-cancellable lease obligations, including Hyperion, totaled $347 billion.
Among the companies analyzed by The Wall Street Journal, future payments committed under leases not yet in effect total $1.2 trillion, representing off-balance-sheet obligations, about four times the amount disclosed a year earlier. Besides Meta, the Journal reviewed commitments from Alphabet, Amazon, Microsoft, Oracle, Nvidia, Broadcom, SpaceX, and AMD. Data centers are filled with hardware, including Nvidia chips for training and running models, and memory chips for storage. To procure all this hardware, companies sign long-term contracts well in advance to secure supplier capacity.
The total purchase commitments and other buying obligations of the analyzed companies amount to $1.9 trillion. Under accounting rules, purchase commitments typically remain off the balance sheet until the related goods or services are delivered. Alphabet's purchase commitments and contractual obligations surged to $811 billion as of June 30. Like other companies, its disclosures make it difficult to know exactly what it is buying. The company said these commitments mainly relate to "technology infrastructure and inventory" and "agreements to secure energy for data center operations." Alphabet did not detail why these obligations jumped sharply from the previously disclosed $332 billion in just three months. The commitments span several years, with energy-related obligations extending to 2054.
Some companies' off-balance-sheet exposures also include agreements to acquire other companies' stock in the future or guarantees for other tenants' leases. Nvidia committed to $27 billion in equity investments between April 26 and the end of its fiscal year in January 2027.
There is reason to believe tech companies can honor all these commitments. Optimists point out that the surge in demand for AI tools has boosted stock markets and created shortages of key hardware, itself evidence that demand will remain strong in the coming years, generating the cash needed to pay these bills. Alphabet's and Amazon's latest earnings reports show free cash flow has turned negative, meaning their capital expenditure has exceeded the cash income generated by their core businesses.
Moreover, this does not account for the impact of trillions of dollars in off-balance-sheet commitments. Whether or not future revenue materializes, purchase commitments and signed leases are in most cases non-cancellable. If conditions deteriorate, tech companies will have to pay high costs for infrastructure that cannot generate profitable returns. As these off-balance-sheet commitments become more frequent, larger, and more complex, investors find it increasingly difficult to assess companies' potential total leverage.