Alphabet Inc., the parent company of Google, has started its latest multi-billion euro bond deal. This move comes just months after they raised nearly $32 billion through bonds in dollar, sterling, and Swiss franc currencies.
The tech giant is selling at least €3 billion ($3.5 billion) in bonds across six different tranches. A person familiar with the deal, who asked not to be named, said initial pricing for the longest part of the deal—a bond maturing in 2063—is around 205 basis points above midswaps.
Alphabet announced last week that it plans to spend as much as $190 billion this year on capital expenditures. Much of this will go towards data centers, which are crucial for its big plans in artificial intelligence. The money raised from Monday’s bond sale, and any other simultaneous offerings, will be used for general company needs, including potentially paying back existing debt.
Alphabet, along with Meta Platforms Inc., Microsoft Corp, and Amazon.com Inc., plans to spend as much as $725 billion this year on AI data center equipment and other capital investments. This is an increase from their earlier projections.
Ian Horn, a portfolio manager at Muzinich & Co Ltd, commented on cloud-computing firms in general, saying, “These companies are going to become a bigger and bigger part of the bond market, just like they did in the equity market.”
Alphabet’s previous bond sale in February was its largest-ever US dollar bond sale, raising $20 billion. This was more than the $15 billion they initially expected, after receiving orders that peaked at $103 billion. They also sold bonds for the first time in Switzerland and the UK, including a rare 100-year bond sale. This was the first time a tech company had sold such long-term bonds since the dot-com boom of the late 1990s.
Despite this, about $300 billion worth of various types of AI-related debt has already been sold. Some recent deals by large cloud providers have shown signs that investors are getting tired, with bankers having to offer more attractive terms and higher returns to investors who have many options.
For example, Meta Platforms Inc. priced a $25 billion bond sale on April 30. This happened as its shares saw their biggest drop in six months due to worries that its AI spending might not generate enough returns. Almost all six parts of Meta’s deal were priced with higher risk premiums than a similar sale in October by the Facebook parent, indicating that investors are demanding more compensation. Also, the highest level of orders was lower than in the previous sale.
