Google‘s parent Alphabet is seeking $6.7 billion from bond investors. According to a report by the news agency Reuters, the tech giant is selling €6 billion of debt after a share-price collapse wiped roughly $500 billion off its market value last week. The report claims the offering comes as investors question the cost of expanding artificial intelligence (AI) infrastructure and whether the eventual returns will justify the spending.Last week, Alphabet’s shares fell more than 12% after quarterly results showed slower-than-expected growth in Google Search and cash burn that unsettled investors. Despite those concerns, demand for the new bonds exceeded €17 billion, according to a memo from one of the banks arranging the sale seen by Reuters. The offering tests investors’ willingness to lend after a selloff across technology stocks and debt.
What Google is offering investors
The bonds are being sold in seven portions, known as tranches, with repayment dates ranging from two to 19 years. Six carry fixed interest rates, while one has a floating rate that changes with a benchmark, according to a US Securities and Exchange Commission filing seen by Reuters.Alphabet said it would use the proceeds for general corporate purposes, which could include repaying existing debt. The filing did not earmark the money exclusively for AI projects. Barclays, BNP Paribas and Deutsche Bank are managing the offering.This is the company’s second euro-denominated bond sale this year. It raised €9 billion across six tranches in May, following a rare sterling bond sale in February with a 100-year repayment period.
Why AI spending is worrying investors
Alphabet expects capital spending of up to $205 billion for the full year. Capital spending covers investment in long-term assets, including the infrastructure needed to run and develop AI services.The company also disclosed substantial future lease commitments. As of September 30, it had signed leases, mainly for data centres, requiring $130.5 billion in future payments. Those leases had not yet begun and were not yet recorded on its balance sheet, according to the filing.Investors have become concerned about both the financing needed for such expansion and the revenue required to support it. Moreover, disappointing quarterly results from Alphabet and Amazon, two major data-centre investors, added to the recent volatility.Alphabet’s US-listed shares fell nearly 19% in October, their worst monthly performance on record. The technology-heavy Nasdaq declined 5% over the same period.
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