As the race for artificial intelligence investment intensifies, Alphabet is returning to the US high-grade bond market, becoming the latest major technology company to participate in the current wave of borrowing led by tech giants.
According to sources familiar with the matter who spoke to Bloomberg, the bond offering from Google's parent company, Alphabet, will be divided into as many as seven parts. Preliminary pricing guidance for the longest-dated bond, maturing in 2066, indicates its yield will be approximately 1.2 percentage points above US Treasuries. This move signifies Alphabet's second major financing effort in less than four months, further solidifying its substantial capital reserves required for AI infrastructure development.
This issuance comes at a time when so-called "hyperscale cloud providers" are significantly increasing their capital expenditures. This group of companies is projected to invest over $650 billion this year to expand artificial intelligence infrastructure. Since last year, this cohort has issued a substantial volume of debt to the market. While investors continue to absorb it actively, concerns are mounting that excessive AI spending could potentially trigger a bubble.
This trend has been particularly evident recently. Just last week, Oracle raised $25 billion through a bond sale, attracting a record $129 billion in orders at the peak of the bookbuilding process, demonstrating robust market demand for bonds issued by technology giants.
**Capital Expenditure Climbs Beyond Expectations**
Alphabet's financing move is closely tied to its aggressive capital expenditure plans. The company announced last week that its expenditures for this year are expected to reach as high as $185 billion, a figure that significantly surpasses previous market forecasts.
This massive funding requirement stems from ongoing investments in artificial intelligence, cloud infrastructure, and data centers. According to estimates from Bloomberg Intelligence, total capital expenditure in this sector is projected to reach $3 trillion by 2029.
Despite the substantial outlays, Alphabet's financial performance remains strong. Its latest fourth-quarter earnings report showed that the company's profits exceeded the average analyst estimate compiled by Bloomberg.
**Global Financing Strategy and Long-Term Bonds**
Beyond the dollar bond market, Alphabet is also actively expanding its global financing channels. According to sources who spoke to Bloomberg, in addition to this dollar bond offering, the company has enlisted banks to arrange potential Swiss franc and pound sterling debt issuances, which include rare 100-year notes.
This is not Alphabet's first large-scale financing effort recently. The tech giant raised $17.5 billion in the US bond market last November, attracting around $90 billion in orders at that time. Around the same period, the company also issued €6.5 billion in notes in Europe.
Against the backdrop of the escalating AI arms race, it has become commonplace for tech giants to secure long-term, low-cost funding through the bond market. While massive fundraisings by peers like Oracle have been well-received by the market, the pricing and subscription levels for Alphabet's current offering will serve as another indicator testing investor appetite for the technology sector's continued high levels of investment.
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