NEW YORK: Alphabet Inc needs to borrow heavily to fund investments in artificial intelligence (AI), and it’s increasingly tapping every market to do so.
The parent of Google Inc sold its biggest-ever euro-denominated bonds and and its first Canadian dollar notes, raising almost US$17bil.
That came just a few months after the company issued sterling, and Swiss franc-denominated notes, its debut offerings in the currencies, around the same time as a US dollar debt sale.
“The dollar market is becoming crowded, so there’s an incentive to take these deals outside the United States,” said Karl Schamotta, chief market strategist at Corpay.
“The global investor base is expressing a lot of demand for exposure to AI in the United States.”
The company priced €9bil in euro bonds, according to sources.
The sale, in six parts, drew more than €18.3bil of bids, they said, asking not to be identified because details are private.
The firm also raised C$8.5bil from a four-part bond sale in Canadian dollars, marking the largest-ever investment-grade corporate offering in the currency.
The deal attracted more than C$20bil of orders, the people said.
Alphabet has diversified the most away from the dollar among US hyperscalers in its push to fund AI infrastructure.
Roughly half of the US$86bil of debt it has raised since last year was issued in other currencies other than the US dollar.
The tech company’s funding needs are vast.
Alphabet said last week that it’s planning to spend as much as US$190bil this year on data centres and other capital investments, mostly tied to AI.
Proceeds from the latest offerings will be used for general corporate purposes, which may include refinancing debt, sources added.
Alphabet, along with Meta Platforms Inc, Microsoft Corp and Amazon.com Inc are planning to spend as much as US$725bil this year on AI data centre 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 debt sales in February raised US$20bil in its biggest-ever US dollar note offering, more than the US$15bil initially expected, after racking up orders that peaked at US$103bil.
Its UK deal included a rare issue 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 more than US$325bil of various types of AI debt already having been sold, some more recent deals to fund cloud computing capacity have shown signs of investor fatigue, with bankers having to offer more incentives and higher compensation to investors who are spoiled for choice.
Meta priced a US$25bil bond sale on April 30 as its shares suffered their biggest decline in six months on concern that its AI spending may not generate high enough returns.
Nearly all of the six portions of the deal were priced at higher risk premiums than an October sale by the Facebook parent, signalling that investors are demanding more compensation, while peak orders were also lower than in the prior sale.
Alphabet is paying more to issue its latest euro bonds, with tranches pricing wider than in November at the same maturities.
Meanwhile, the company offered an average new-issue concession of 8.8 basis points (bps) across the six tranches, compared with 7.8 bps on its previous deal. — Bloomberg
