Alphabet, Google's parent, whose quarterly free cash flow (FCF) turned negative due to artificial intelligence (AI) infrastructure investments, has again moved to raise a large sum in the bond market.
According to Reuters on the 6th (local time), Alphabet said it will issue up to $25 billion (about 36 trillion won) in dollar-denominated corporate bonds. The bonds will be split into 10 tranches with maturities ranging from 2 to 40 years. The longest 40-year notes are being discussed at a yield 1.3 percentage points (p) above U.S. Government Bonds. Investors showed strong interest, placing $115 billion (about 164 trillion won) in orders, more than four times the issue size.
Alphabet also sought to calm market concerns about an increase in bond supply, saying, "We plan to limit U.S. corporate bond issuance to twice a year going forward."
Alphabet is taking on such large borrowings because funding needs are surging as it ramps up AI infrastructure investments. The company has twice raised its annual capital spending plan this year and will invest a total of $205 billion (about 292 trillion won). As a result of this aggressive spending, Alphabet posted a quarterly free cash flow deficit in the second quarter, the first since its 2004 initial public offering (IPO).
Alphabet has raised more than $50 billion this year by issuing corporate bonds in the United States, Europe and Japan. In addition, in June it carried out a massive $85 billion seasoned equity offering to secure funds. As of the 7th of last month, the bond issuance by major U.S. data center operating corporations, including Alphabet, stood at $194 billion (about 276 trillion won), up 79% from the same period last year.