Alphabet Returns to Euro Debt Market for Latest AI-Driven Bond Issue

Alphabet Returns to Euro Market with €3 Billion Bond Sale

Alphabet Inc., the parent company of Google, has kicked off its latest megabond deal as it returns to the euro market just months after selling nearly $32 billion of dollar, sterling, and Swiss franc-denominated debt. The company is selling at least €3 billion ($3.5 billion) in bonds across six tranches, according to a person with knowledge of the matter.

The bond sale comes as Alphabet plans to spend as much as $190 billion this year on capital expenditures, including investments in data centers critical to its artificial intelligence ambitions. Proceeds from the offering, as well as from any concurrent offering, will be used for general corporate purposes, which may include the repayment of outstanding debt.

Alphabet is not alone in its investment in artificial intelligence. The company, 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.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The bond market is likely to see an increase in debt issuance from cloud-computing firms, which are investing heavily in artificial intelligence. Ian Horn, a portfolio manager at Muzinich & Co Ltd, notes that these companies are becoming a bigger part of the bond market, just like they did in the equity market.

Alphabet's previous bond sale in February raised $20 billion in its biggest-ever US dollar bond sale, exceeding the initial expectation of $15 billion. The company 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.

However, some 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, but the deal was priced at higher risk premiums than an October sale, signaling that investors are demanding more compensation.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

There are concerns about how the bond issuance will be absorbed by the market, and some investors are taking advantage of the situation to add spread without taking on riskier names. Alphabet's latest euro-currency offering, which is expected to price later on Monday, is being arranged by Barclays Plc, BNP Paribas SA, Deutsche Bank AG, and HSBC Holdings Plc.