Bankers were still putting the final touches on Alphabet Inc.'s blockbuster US$17 billion of bond sales when word started to spread Monday morning on Wall Street: the company is already hawking more debt.
This time, it was in yen. Alphabet's executives had stayed up through the night to get on with Tokyo investors and pitch the deal. The week prior it had been in euros and Canadian dollars, and, a few months before that, dollars, pounds and Swiss francs. In all, Alphabet will have raised close to US$60 billion by the time the yen sale is finalized, a four-month run that ranks as one of the greatest corporate borrowing binges ever.
Scale of Fundraising
Both the sheer scale of the fundraising — quadruple the amount of bonds Alphabet had sold in its first 26 years in business — and the span-the-globe approach it took to pull it off has put the tech giant at the forefront of a race to fund an artificial intelligence buildout expected to cost nearly US$5 trillion by the end of 2030. All told, tech companies have already sold more than US$300 billion of debt to U.S. investors to fund AI spending.
Wall Street Follows Suit
And Wall Street bankers say they will, one by one, follow Alphabet's lead and tap overseas markets because they can't depend on America alone to finance those sorts of ambitions — not without overwhelming demand and sending funding costs sharply higher. Some signs of stress are already emerging. While tech stocks keep soaring — lifting benchmark equity indexes — returns on their debt have been lagging those generated by the investment-grade market as a whole.
“The reality is that there's so much need for depth, they have to tap every single source of liquidity that they can,” said Nanda Kamat, global head of project finance at Royal Bank of Canada, which helped lead Alphabet's $8.5 billion bond sale last week, the country's biggest ever.
Impact on Overseas Markets
For overseas bond markets, the deals could prove disruptive, too. As hyperscalers fan out across the globe in search of funding, some analysts and investors are warning that the coming wave of issuance into foreign-currency markets risks crowding out local companies that have spent decades relying on relatively steady access to funding at home.
“All this AI issuance makes you wonder at what point there are just too many bonds,” said Jim Fitzpatrick, head of U.S. investment-grade research at Allspring Global Investments. “No one wants to do that one deal that goes badly.”
Yen Deal Execution
That need to tap global liquidity has been on full display in Alphabet's yen deal this week. Bankers have worked around the clock to execute the unprecedented eight-part sale. Debt capital markets desks and the company's finance team were up as early as 3 a.m. in the U.S. to launch into the Japanese market Monday, kicking off a multiday process in which order books are handed from Tokyo to London to New York and back again, according to a person with knowledge of the transaction.
The deal, which could close as soon as Friday, marks Alphabet's fourth bond sale in a new currency this year alone, and its sixth overall. Depending on the final size, the company could eclipse Anheuser-Busch InBev for the largest global corporate borrowing spree ever over a half-year span.
