The AI arms race fuels a financing wave for tech giants, with Google's parent company planning to issue over $20 billion in bonds after Meta

Google's parent company Alphabet Inc. is planning to raise approximately $22 billion in bonds in the U.S. and European markets, becoming the latest tech giant to significantly increase debt following Meta and Oracle, highlighting that the artificial intelligence (AI) arms race is driving the tech industry into a new financing cycle.

On Monday, November 3rd, Eastern Time, media reports indicated that Alphabet plans to issue about $15 billion in bonds in the U.S. market and has initiated a €6.5 billion (approximately $7.48 billion) euro bond issuance. Subsequent reports stated that the company's dollar bond issuance attracted approximately $90 billion in subscription demand. Alphabet set the amount for the dollar bond issuance at $17.5 billion.

Following Meta's record bond issuance last Thursday, Alphabet's massive bond issuance once again underscores investors' strong interest in tech giant bonds. This bond issuance came less than a week after Alphabet released its earnings report last Wednesday after the market closed.

The earnings report showed that in the third quarter, Google's cloud computing and AI service demand surged, with total revenue surpassing $100 billion for the first time in history. Excluding traffic acquisition costs (TAC), revenue grew 13% year-over-year to $87.5 billion, marking the highest growth rate since early 2022. During the quarter, Google Cloud's revenue soared 34%, exceeding $15 billion, and is expected to become the company's second-largest source of revenue after search advertising.

When releasing the earnings report, Alphabet's management raised this year's capital expenditure forecast from $85 billion to a record annual level of $91 billion to $93 billion, aimed at accelerating AI development and data center construction, far exceeding the market expectation of $80.67 billion. They also clearly stated that the company's capital expenditure in 2026 will "significantly increase."

The debt issuance frenzy among tech companies has begun to impact corporate bond valuations and has even triggered a chain reaction in the U.S. bond market. Bloomberg index data showed that the average spread of U.S. investment-grade bonds rose by 2 basis points to 78 basis points last Friday. Last week, Wall Street Journal cited analysis stating that Meta's largest single corporate bond issuance plan this year reopened the corporate bond supply floodgates and became one of the factors driving U.S. Treasury yields higher.

Bond Issuance Scale Exceeds Expectations with Maturity Span of 50 Years

Alphabet plans to divide the U.S. bond issuance into up to 8 parts, with maturities ranging from 3 years to 50 years. According to insiders, the longest maturity portion's yield may be about 1.35 percentage points higher than U.S. Treasury bonds The issuance scale of euro-denominated bonds exceeded expectations by 250 million euros. The spread for the 3-year euro bonds is 25 basis points above the benchmark rate, while the spread for the 39-year portion is 158 basis points.

This is the first time Alphabet has issued bonds in the European and American markets since April of this year. Moody's rating agency stated in a report on Monday that Alphabet will use the proceeds from the bond issuance for general corporate purposes, which may include repaying some outstanding debt. These bonds are expected to receive a Moody's Aa2 rating, which is Moody's third-highest credit rating, one notch higher than S&P's rating.

The dollar bond issuance for Alphabet is led by banks such as Goldman Sachs, HSBC, JP Morgan, Bank of America, Citigroup, Morgan Stanley, and Wells Fargo. The euro bond issuance is led by Goldman Sachs, HSBC, JP Morgan, BNP Paribas, Crédit Agricole, and Deutsche Bank. Pricing is expected to be completed on Monday.

AI Spending Drives $3 Trillion Investment Plan in Tech Industry

Tech companies are betting on a future driven by massive data centers and a large number of servers, which is pushing up AI spending. Morgan Stanley estimates that by 2028, large tech companies known as "hyperscale cloud providers" will invest approximately $3 trillion in infrastructure such as data centers, with about half financed through cash flow.

Alphabet's latest bond issuance comes at a time when demand for its cloud and AI services is surging. The company is investing record amounts to accelerate AI development and further integrate AI into popular products, including search.

This wave of borrowing is becoming a trend in the tech industry. Oracle disclosed in documents submitted to regulators in September that it is launching an $18 billion investment-grade bond issuance. More than a month later, Meta just completed a $30 billion bond issuance last month, setting a record for the highest issuance scale of high-grade corporate bonds this year. Moreover, the subscription amount for Meta's newly issued bonds peaked at $125 billion, breaking the previous record of $120 billion set by CVS Health in 2018.

Emile El Nems, a senior credit officer at Moody's, commented: "These companies indicate they are facing capacity constraints, and with the potential demand that AI computing may bring, you will find that tech companies entering the bond market has become a clear trend."

Increased Supply Raises Spread Concerns

The surge in borrowing by tech companies has begun to show its impact on corporate bond valuations. Morgan Stanley credit strategists Eric Beinstein and Nathaniel Rosenbaum noted in a report on Monday that bond issuance activity in early November may remain active, partly because some frequent issuers have yet to enter the market and may wish to issue before the end of the year.

"As investors consider recent AI-related bond issuances and their impact on supply speed in 2026, there is room for spreads to widen slightly further," the analysts wrote, "but given that yields remain at attractive levels and corporate earnings are strong, it is difficult to see this moderate widening evolve into a larger-scale sell-off."

Alphabet maintains a leading position in the digital services sector, particularly through its Google search service integrated with the Gemini AI platform. The company also holds a dominant market position through its advertising and YouTube business Emile El Nems stated that Alphabet, Oracle, and Meta have lower leverage than their peers, which provides them with more borrowing capacity