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Alphabet has lined up banks to sell a rare 100-year bond, escalating a borrowing spree by Big Tech companies rushing to fund their huge investments in artificial intelligence this year.
The so-called century bonds will form part of the first-ever sterling issuance by Google’s parent company this week, according to people familiar with the matter.
Alphabet was also selling $20 billion of dollar bonds on Monday and was planning a Swiss franc bond sale, the people said. He said the dollar portion of the deal has been increased from $15 billion due to strong demand.
Century bonds – long-term borrowing at its finest – are highly uncommon, although they were sold rapidly during periods of very low interest rates following the financial crisis, including by governments such as Austria and Argentina.
The University of Oxford, EDF and the Wellcome Trust – the most recent in 2018 – are the only issuers to have previously tapped the Sterling Century market. Such sales are even rarer in the technology sector, with most of the industry’s largest conglomerates issuing bonds for periods up to 40 years, although IBM sold a 100-year bond in 1996.
Big tech companies and their suppliers are expected to invest nearly $700 billion in AI infrastructure this year and are increasingly turning to debt markets to finance massive data center construction.
In November Alphabet sold $17.5 billion of bonds in the US, including a 50-year bond – the longest-term dollar bond sold by a tech firm last year – and raised €6.5 billion in European markets.
Last week Oracle raised $25bn in a bond sale that raised more than $125bn in orders.
Alphabet, Amazon and Meta all increased their capital spending plans during their recent earnings reports, raising questions about whether they will be able to finance the unprecedented spending from their cash flow alone.
Last week, Google’s parent company reported annual sales that exceeded $400 billion for the first time, beating investor expectations for both revenue and profits in the most recent quarter. It said it planned to spend up to $185 billion on capital expenditures this year, nearly double last year’s total, to capitalize on growing demand for its Gemini AI assistant.
Alphabet’s long-term debt is set to rise to $46.5 billion by 2025, more than four times the previous year, though it still had $126.8 billion in cash and equivalents at year end.
Investor demand was strongest in the smallest portion of Monday’s deal, which offered pricing just 0.27 percentage points above three-year U.S. Treasuries, according to people familiar with the deal, compared with 0.6 percentage points during initial pricing discussions.
The longest portion of the offering, a 40-year bond, is expected to fetch 0.95 percentage points over U.S. Treasuries, down from 1.2 percentage points during early talks, the people said.
Bank of America, Goldman Sachs and JPMorgan are the bookrunners of the bond sale in the three currencies. All three declined to comment or did not immediately respond to requests for comment.
Alphabet did not immediately respond to a request for comment.
