Bond investors are betting on another 100 years of Google
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- Alphabet is issuing a rare 100-year bond amid a borrowing spree to fund its AI projects.
- The company has sold tens of billions of bonds recently in a range of currencies.
- Century bonds are rare, with the last ones from tech firms issue during the 90s dot-com era.
What are the odds Google will still be around in 2126? According to investors bidding on a rare 100-year bond from the tech titan this week, they're pretty strong.
Alphabet is offering a 100-year bond as part of its latest borrowing bonanza to finance its massive AI spending. The firm is seeking tens of billions of dollars for its projects via debt issuance in a range of currencies.
It has already raised $20 billion from US investors this week in a heavily oversubscribed offering, and is seeking at least $7.5 billion denominated in UK sterling and $3.6 billion in Swiss francs.
Alphabet is expected to spend at least $175 billion on its AI buildout in 2026. That's second only to Amazon's $200 billion among mega-cap hyperscalers. Equity investors have largely encouraged the Google parent's capex plans. The stock is up 68% in the last year.
Now, bond investors are casting their own vote of confidence.
According to Bloomberg, the century bonds, as well as the bonds with shorter maturities, drew strong demand. The £1 billion slice of the deal attracted £9.5 billion worth of bids. Its dollar bond offering in the US on Monday drew record demand from investors, Bloomberg said.
Alphabet's borrowing spree is the latest big debt raise by a mega-cap tech company, with Meta Platforms and Amazon also recently completing their own bond sales. The move comes as investors and commentators have expressed some concern that debt financing for AI could be a risk if the market wobbles and investor appetite wanes.
Yet, if demand for Alphabet's bonds is any indication, there's no sign yet that investors are shying away from lending to the top tech firms pursuing AI.
Century bonds are rare in the corporate debt world. Issuance of debt at such a long maturity is seen in sovereign bond markets. Ford issued a hundred-year bond in 2021, but the market hasn't seen such an issuance from a tech firm since the 1990s, when companies like Motorola and IBM were selling them.
Alphabet's bonds are highly rated by credit rating agencies, stamped Aa2 by Moody's and AA+ by S&P Global.