Alphabet, Google's parent company, will issue tens of trillions of won in bonds to raise funds for large-scale artificial intelligence (AI) investment. It is also said to be planning to issue 100-year corporate bonds.
The Financial Times (FT) and Bloomberg News reported on the 9th, citing sources, that Alphabet plans to issue $20 billion (about 29 trillion won) in U.S. dollar-denominated bonds in the United States. Boosted by stronger-than-expected demand, the dollar bond offering was increased to $20 billion from the initially planned $15 billion, FT said. Alphabet's dollar bonds will come in seven tranches with different maturities, with the longest maturing in 2066, a 40-year note.
According to sources, Alphabet will also issue bonds in Swiss francs and British pounds. The specific size of the offerings was not disclosed, but in the United Kingdom it is pushing a 100-year ultra-long bond.
It is unusual for a tech company to issue a 100-year bond. Among big tech, the longest maturities issued so far have mostly been 40 years. In the industry, the last example is IBM's 100-year bond issued in 1996. Since the global financial crisis, some countries, including Austria and Argentina, have issued 100-year bonds, and the most recent examples include University of Oxford, Électricité de France, and the Wellcome Trust issuing pound-denominated 100-year bonds in 2018.
In November last year, Alphabet also raised $17.5 billion (about 25 trillion won) in the U.S. bond market and €6.5 billion (about 11 trillion won) in Europe, and the 50-year note issued then had the longest maturity among bonds issued by tech companies in the United States last year.
Alphabet's aggressive bond issuance is seen as a move to secure cash for AI infrastructure investment. Earlier, Alphabet said it would increase this year's capital expenditure to as much as $185 billion (about 270 trillion won) to meet AI demand. That is about double last year's level. Big tech corporations including Alphabet, Amazon, Meta, and Microsoft are expected to spend $660 billion (about 966 trillion won) this year on building AI data centers and securing high-performance chips.
These hyperscalers (large cloud corporations), which are continuing astronomical AI investments this year following last year, are relying on the bond market to raise the necessary funds. They carried out a debt-fueled borrowing spree last year, raising $165 billion (about 240 trillion won) through bond issuance and other means. Oracle also issued $25 billion in bonds this month.
U.S. investment bank Morgan Stanley projected that hyperscalers' borrowing this year will reach $400 billion (about 585 trillion won). As a result, it forecast total investment-grade bond issuance would approach a record $2.25 trillion.
Meanwhile, xAI, the AI startup led by Tesla Chief Executive Elon Musk, is finalizing a deal to raise $3.4 billion from U.S. private equity firm Apollo Global Management, the tech outlet The Information reported, citing sources. Under the transaction, a special purpose vehicle (SPV) will borrow from Apollo to buy Nvidia chips and then lease them to xAI.