Alphabet selling very rare 100-year bunds to help fund AI investment

In a bold move to finance its extensive artificial intelligence initiatives, Alphabet is set to issue a rare 100-year bond. This significant financial strategy comes amid a broader trend where major technology firms are ramping up their borrowing to support substantial investments in AI this year. Sources close to the matter indicate that this century bond will be part of Alphabet's inaugural sterling issuance scheduled for this week. Additionally, the company is planning to release $20 billion in dollar bonds, with strong market interest prompting an increase from the initial $15 billion target. Furthermore, preparations are underway for a bond sale in Swiss francs. Century bonds, which represent the longest-term borrowing option, are quite uncommon. However, there was a brief surge in their issuance during the post-financial crisis era when interest rates were notably low, with countries like Austria and Argentina participating in such sales. In the realm of sterling bonds, only a few entities, including the University of Oxford and EDF, have ventured into 100-year bonds, with the last notable issuance occurring in 2018. For tech companies, such long-term bonds are even rarer, as most typically opt for bonds with a duration of up to 40 years. Notably, IBM did issue a 100-year bond back in 1996. A banker familiar with Alphabet's current transaction explained that the company aims to broaden its investor base due to the immense capital requirements of Big Tech. Issuing a century bond in the sterling market is viewed as a more cost-effective approach compared to the dollar market, where interest rates are higher. This unconventional bond could attract institutional buyers, such as life insurance companies and pension funds, which are often seeking long-term investment opportunities, according to Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.