Alphabet/Google (G00G) borrowed another $20 billion in its biggest ever U.S. dollar bond sale on Monday. And that’s just the beginning. The company is also planning debut deals in Switzerland and the UK. Including the sale of 100-year bonds.
Drum role, please: That would be the the first time a tech company has tried a 100-year offering since the Dotcom boom of the late 1990s. (Remember how that ended?)
The big borrowing spree comes just days after tech companies from Meta Platforms (META) to Amazon.com (AMZN) said they were ramping up capital spending to build out infrastructure for AI.
Those capital spending plans sent AI sector stocks into a steep decline on fears that AI companies would not be able to generate the cash flow needed to fund these capital spending plans.
But that was sooo last week.
Today, Monday, February 9, the Alphabet bond sale drew more than $100 billion of orders. Alphabet’s bond sale on Monday came in seven parts. The yield on the longest portion of the offering–a bond maturing in 2066 — was 0.95 percentage points over Treasuries. That’s a very tight risk premium over Treasury yields. The offer had been priced earlier at a 1.2 percentage point premium.
“Clearly we’re not in a typical capex cycle, and after previously being net savers, the companies involved are now going deep into the well for financing to secure the resources to compete,” Andrew Dassori, chief investment officer at Wavelength Capital Management, told Bloomberg. “This is a major transition, and a critical one when thinking about potential risk and return for corporate bonds in the US.”
Alphabet last week said it’s planning for as much as $185 billion of capital expenditures this year, more than it has spent in the past three years combined.
Other hyperscalers plan to boost spending too. Capital expenditures for the four biggest U.S. tech companies are forecast to reach about $650 billion in 2026.
In a shift from a reliance on the equity markets much of that spending is being funded in the bond market. Just last week, Oracle (ORCL) raised $25 billion from a bond offering that attracted a record $129 billion of orders at its peak.
Morgan Stanley expects hyperscalers to borrow $400 billion this year, up from $165 billion in 2025. That volume of offering will likely drive high-grade debt issuance to a record $2.25 trillion this year, Vishwas Patkar, head of US credit strategy at the bank, wrote in a note on Monday. Some credit strategists–including Patkar and JPMorgan Chase’s Nathaniel Rosenbaum–expect the massive issuance to push corporate bond spreads wider above Treasuries.
“We think that the playbook is similar to 1997/98 or 2005; credit underperforms, but not ‘end of cycle,’” Patkar wrote, referring to a period when defaults rise and credit availability tightens.
Alphabet last tapped the U.S. bond market in November, when it raised $17.5 billion in a deal that attracted about $90 billion of orders. As part of that transaction, it then sold a 50-year note–the longest corporate tech bond offering in U.S. dollars last year, according to Bloomberg.
Capital spending in artificial intelligence, cloud infrastructure and data centers is expected to reach $3 trillion in aggregate by 2029, according to a Bloomberg estimate.
