Alphabet Inc. sold $17.5 billion of bonds in the US, after issuing €6.5 billion ($7.48 billion) of notes in Europe, adding to a wave of borrowing from technology companies as they invest aggressively in artificial intelligence.
The firm’s latest earnings showed surging demand for cloud and AI services. Technology companies are betting on a future powered by gigantic data centers filled with humming servers, which has supercharged spending on AI.
Morgan Stanley expects big firms known as hyperscalers to spend about $3 trillion on infrastructure such as data centers between now and 2028. Cash flow can fund about half of that, but debt will be a significant source of funds too.
Alphabet priced the bonds in the US in eight parts, ranging from three to 50 years, according to a person with knowledge of the matter. The longest portion of the sale yields 1.07 percentage points more than Treasuries, said the person, who asked not to be identified as the details are private. Initial price talk was a spread of about 1.35 percentage points. The company received about $90 billion of orders for the securities.
The Google parent’s euro-denominated bond sale, the second biggest from a non-financial company this year in the region, was €250 million more than had been expected. The US dollar and euro debt sales are Alphabet’s first since April, when it also tapped markets on both sides of the Atlantic.
Meta Platforms Inc. sold $30 billion of bonds last week, the biggest US high-grade bond sale of the year, following a $27 billion private bond sale for a Meta-related project in Louisiana. Oracle Corp. issued $18 billion US investment-grade bonds in September.
Tech companies’ growing borrowing needs are already showing signs of weighing on corporate bond valuations. The average US high-grade spread rose 0.02 percentage point, or 2 basis points, to 78 basis points on Friday, according to Bloomberg index data.
Issuance will likely remain active in early November, partly because a series of frequent issuers hasn’t yet come to market and may look to issue before the end of the year, JPMorgan Chase & Co. credit strategists including Eric Beinstein and Nathaniel Rosenbaum wrote in a note Monday.
“There is room for spreads to widen a little bit more as investors think about the recent AI-related issuance and what it may mean for the pace of supply in 2026,” wrote the analysts. “But given that yields remain at attractive levels and earnings are strong it’s hard to see this modest widening becoming a larger selloff.”
Related: Credit Derivatives on Meta Start Trading After Big Bond Sales
AI Demand
Alphabet’s latest bond sale comes after it reported jumping demand for cloud and AI services, with third-quarter sales rising to $87.5 billion. The company is investing record amounts to accelerate AI development and further push artificial intelligence into its popular products including search, with total capital expenditures expected to reach $91 billion to $93 billion this year. Monday’s bonds are expected to be rated Aa2 by Moody’s, the third highest credit grade. They’re expected to be rated one notch higher by S&P Global Ratings.
The company may use the proceeds to refinance debt, among other uses. The spread on the three-year euro debt was 25 basis points over the reference rate, known as mid-swaps, they added. The 39-year part was priced at 158 basis points above the benchmark.
Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan, Bank of America Corp., Citigroup Inc., Morgan Stanley, and Wells Fargo & Co. led the US dollar offering. Banks including Goldman Sachs, HSBC, JPMorgan, BNP Paribas, Crédit Agricole CIB and Deutsche Bank managed the euro sale.
Representatives for Goldman Sachs, JPMorgan, Bank of America, Citigroup, Wells Fargo, BNP, Crédit Agricole and Deutsche Bank declined to comment. Representatives for HSBC and Morgan Stanley didn’t immediately respond to requests for comment.