Alphabet Inc. is selling its biggest-ever euro-denominated bond and tapping the Canadian dollar debt market just months after record-breaking deals in other currencies, showing the huge funding needs of its ambitions in artificial intelligence.
The Google parent is set to raise at least €9 billion ($10.5 billion) in euro bonds, its biggest ever deal in the currency, according to people with knowledge of the matter. The sale, which spans six tranches, has drawn more than €25.2 billion of bids, they said, asking not to be identified because details are private.
The firm has also kicked off the sale of a four-part Canadian dollar bond sale, with maturities ranging from five to 30 years, the people said. Initial price talk on the longest tranche is for a spread of 1.15 percentage point above the benchmark. The euro and Canadian dollar deals come just months after the company sold nearly $32 billion of dollar, sterling and Swiss franc-denominated debt.
Alphabet said last week that it’s planning capital expenditures of as much as $190 billion this year as it invests heavily in data centers critical to its AI goals. Proceeds from Tuesday’s offering — as well as from any concurrent offering — will be used for general corporate purposes, which may include the repayment of outstanding debt, the person with knowledge of the deal said.
Alphabet, along with Meta Platforms Inc., Microsoft Corp and Amazon.com Inc. are planning to spend as much as $725 billion this year on AI data center equipment and other capital, increasing their earlier projections.
“These companies are going to become a bigger and bigger part of the bond market, just like they did in the equity market,” said Ian Horn, a portfolio manager at Muzinich & Co Ltd, speaking about cloud-computing firms in general.
Alphabet’s previous bond sale in February raised $20 billion in its biggest-ever US dollar bond sale — more than the $15 billion initially expected, after racking up orders that peaked at $103 billion. It also sold debut deals in Switzerland and the UK, including a rare sale of 100-year bonds — marking the first time a tech company has priced such an offering since the dot-com frenzy of the late 1990s.
Still, with around $300 billion of various types of AI debt already sold, some more recent deals by hyperscalers have shown signs of investor fatigue, with bankers having to offer more incentives and higher compensation to investors who are spoiled for choice.
Meta Platforms Inc. priced a $25 billion bond sale on April 30 as its shares suffered their biggest decline in six months on concern that its AI spending may not generate returns. Nearly all of the six portions of the deal were priced at higher risk premiums than an October sale by the Facebook parent, signaling that investors are demanding more compensation, while peak orders were also lower than in the prior sale.
There are concerns about how the bond issuance will be absorbed by the market and “you’re getting paid for that, but it’s not reflective necessarily of the credit fundamentals,” Muzinich’s Horn said. “That could be a nice opportunity to add spread without really having to go to riskier names.”
The new euro bonds were offering an average new-issue premium of around 40 basis points per tranche at initial price talk versus Alphabet’s existing deals, according to calculations by Bloomberg.
Alphabet’s latest euro-currency offering, which is expected to price later on Tuesday, is being arranged by Barclays Plc, BNP Paribas SA, Deutsche Bank AG and HSBC Holdings Plc. S&P Global Ratings assigned the proposed euro and Canadian dollar deal an AA+ rating, according to a statement.
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