Google ‘s parent Alphabet is seeking $6.7 billion from bond investors. The tech giant is selling €6 billion of debt after a share-price collapse wiped roughly $500 billion off its market value last week, according to a report by the news agency Reuters. 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 bonds are being sold in seven portions, known as tranches, with repayment dates ranging from two to 19 years. As of September 30, it had signed leases, mainly for data centres, requiring $130.5 billion in future payments.
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. Those leases had not yet begun and were not yet recorded on its balance sheet, according to the filing. The offering tests investors’ willingness to lend after a selloff across technology stocks and debt. The company also disclosed substantial future lease commitments. 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.