Alphabet Issues Rare 100-Year Bonds to Fuel AI Ambitions
▼ Summary
– Alphabet (Google’s parent) is issuing a rare 100-year sterling bond as part of a multi-currency fundraising effort to finance its AI investments.
– The company is also selling $20 billion in dollar bonds, which were upsized from $15 billion due to strong demand, and planning a Swiss franc bond sale.
– Century bonds are highly unusual, especially in the tech sector, with only a few non-tech entities like the University of Oxford having issued sterling century bonds recently.
– A banker stated this multi-currency approach expands the investor pool and avoids over-reliance on the US dollar market, where borrowing is more expensive.
– Such long-term bonds could appeal to institutional investors like pension funds that need to match their long-term liabilities with assets.
In a significant move to secure long-term capital for its ambitious technological ventures, Alphabet Inc., the parent company of Google, is preparing to issue a rare 100-year bond. This forms part of a broader multi-currency fundraising effort this week, which also includes a substantial dollar bond sale and a debut offering in the sterling market. The strategy underscores the immense financial requirements of major technology firms as they compete to develop and deploy advanced artificial intelligence systems.
The company has engaged banks to manage the sale of this century bond, an instrument representing the most extended form of long-term borrowing. While such bonds saw some activity following the financial crisis amid historically low rates, they remain exceptionally uncommon, particularly within the technology sector. Most large tech groups typically issue debt with maturities up to 40 years, making Alphabet’s planned century bond a notable departure. The sterling portion of this issuance is especially rare, with only a handful of entities like the University of Oxford and the Wellcome Trust having entered that market for 100-year debt in recent history.
Alongside this landmark offering, Alphabet is moving forward with a $20 billion dollar-denominated bond sale, which was increased from an initial $15 billion target due to robust investor demand. The company is also arranging a separate bond issuance in Swiss francs. According to financial professionals involved, this multi-currency approach is a deliberate tactic to broaden the base of potential investors. Tapping into diverse global markets helps manage the colossal capital needs without over-saturating any single debt market, such as the U.S. dollar space, where repeated large issuances could create a supply-demand imbalance.
Bankers point out that issuing in the sterling market can be more cost-effective for such long-dated debt, as interest rates there are currently more favorable compared to the dollar market. The unique structure of a 100-year bond is expected to attract specific institutional investors. Pension funds and life insurance companies, for instance, often have mandates to match their long-term liabilities with equally long-term assets, making century bonds an appealing portfolio addition. This aligns with the funding strategies of entities that manage obligations stretching decades into the future.
Analysts observe that this aggressive borrowing push highlights the scale of investment flowing into artificial intelligence infrastructure. Data centers, semiconductor procurement, and research initiatives require unprecedented levels of funding. By locking in capital for a century, Alphabet signals immense confidence in its long-term trajectory and secures financing that aligns with the enduring nature of its strategic bets. The move places it among a very small group of corporations that have undertaken such extended debt obligations, reflecting both its financial strength and the high-stakes race dominating the tech industry.
(Source: Ars Technica)
