Alphabet, the parent company of Google, has made another strategic move in the pursuit of AI dominance. According to recent reports, the tech giant plans to issue an extremely rare century bond. This marks the first time since the late 1990s that a technology company has issued such an ultra-long-term debt instrument.
The move comes as Alphabet seeks to fund unprecedented spending plans driven by its artificial intelligence ambitions. On Monday, Alphabet conducted its largest-ever U.S. dollar bond issuance, raising $20 billion—exceeding initial expectations of $15 billion. Last week, the company indicated its capital expenditures for this year would reach as high as $185 billion.
The century bond issuance, as reported by Bloomberg, would be denominated in British pounds and represent Alphabet's first pound-denominated bond offering. The transaction, which could be priced as early as Tuesday, includes four other pound-denominated tranches. Data compiled by Bloomberg shows this is the first such extreme-duration bond from a tech company since Motorola's issuance in 1997.
The century bond market has traditionally been dominated by government and institutional issuers like universities. For corporations, such transactions remain exceptionally rare due to risks including potential acquisitions, obsolete business models, and technological obsolescence. However, the massive funding requirements for maintaining leadership in the AI capability race are bringing even these unusual instruments back to market.
Gordon Kerr, European Macro Strategist at KBRA, noted: "They want to access investors ranging from structured finance participants to ultra-long-term investors." Primary buyers of century bonds are typically insurance companies and pension funds, though "those underwriting these bonds likely won't be around when they mature." Kerr added that it's difficult to predict whether this will become standard practice, noting that even in government bond markets, such issuances aren't truly common.
Strong demand from UK pension funds and insurers has made the sterling market an attractive venue for long-term financing. According to Bloomberg data, besides government issuers, only Electricite de France SA, Oxford University, and the Wellcome Trust Ltd have previously issued century bonds in this currency market, all in 2021 when sterling high-grade yields hit record lows. Due to their extremely high duration—meaning high sensitivity to interest rate changes—these bonds currently trade well below face value.
The current bond issuance coincides with Alphabet's massive $20 billion dollar-denominated debt offering on Monday, which attracted over $100 billion in orders despite market concerns about AI-related spending pressures on credit markets. This borrowing spree aligns with similar announcements from Meta and Amazon.com about increased expenditures to support ambitious AI initiatives.
Andrew Dassori, Chief Investment Officer at Wavelength Capital Management LLC, observed: "Clearly, we're not in a typical capital expenditure cycle. These companies have transitioned from being net savers to actively tapping capital markets to secure competitive resources—a significant shift that's crucial for assessing risk and return in U.S. corporate bonds."
Alphabet revealed last week that it plans up to $185 billion in capital expenditures this year—exceeding its total spending over the past three years—as it heavily invests in data centers critical to its AI ambitions. The company stated these investments are already boosting revenue through increased online search activity driven by AI.
As other hyperscale companies ramp up spending, capital expenditures from the four largest U.S. tech firms are projected to reach approximately $650 billion by 2026. This spending surge is driving a financing boom that could fundamentally reshape the global economy through disruptive technology. A substantial portion of this expenditure is being funded through bond markets, exemplified by Oracle's record $129 billion order book for its $25 billion bond issuance last week.
Morgan Stanley estimates that hyperscale companies will borrow $400 billion this year, up from $165 billion in 2025. The bank's U.S. credit strategist Vishwas Patkar wrote in a Monday report that this issuance wave could push high-grade bond volume to a record $2.25 trillion this year. Some credit strategists, including Patkar and JPMorgan's Nathaniel Rosenbaum, expect the massive supply to widen corporate bond spreads.
Bloomberg Intelligence estimates that capital expenditures for AI, cloud infrastructure, and data centers will total $3 trillion by 2029. Barclays noted that while pent-up M&A demand and corporate refinancing needs will contribute to overall corporate bond issuance, the primary driver remains borrowing requirements for AI-related investments.
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