Alphabet, the parent company of Google, sells €6 billion ($6.7 billion) bonds on Monday, testing investor interest following a recent selloff in tech equities and debt due to concerns about the AI trade, according to a memo from one of the deal’s organizers.
Alphabet is issuing the new bonds in seven tranches with a total demand of slightly over €17 billion.
The bonds are due to be priced later on Monday and come with maturities of 2 to 19 years. According to an SEC filing, the offering is split into seven tranches: one floating-rate and six fixed-rate.
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This is Alphabet’s second euro-denominated bond sale of the year. It raised €9 billion across six tranches in May, after an unusual 100-year sterling bond issuance back in February.
Worries over how to fund massive AI spending and whether the returns will justify it have put pressure on tech stocks and bonds in recent weeks. The tech-heavy Nasdaq dropped 5% in October.
The latest swings in the market were driven by underwhelming quarterly earnings from Alphabet and Amazon, two of the largest spenders on data centers.
Alphabet plans to put the net proceeds toward general corporate purposes, which could include paying down existing debt. Barclays, BNP Paribas, and Deutsche Bank are the joint book-running managers on the deal, per the SEC filing.
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Last Thursday, Alphabet’s stock dropped more than 12%, its worst single day on record, erasing roughly $500 billion of market value. Investors were unsettled by slower-than-expected growth in Google Search and heavy cash burn in the quarterly results.
The company anticipates capital expenditure of up to $205 billion for the full year.
As of September 30, it had also signed leases, mostly for data centers, that haven’t started yet, representing $130.5 billion in future payments that don’t yet appear on its balance sheet, according to the SEC filing.
In contrast, Microsoft was the only major tech company to generate cash during the quarter.
Even so, analysts expect big tech firms to ramp up bond issuance in Europe to finance infrastructure spending, drawing on the region’s deep, liquid debt markets.
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Alphabet’s stock was up roughly 1% in premarket trading, though its US-listed shares sank nearly 19% in October, the worst month in its history.
Its dollar-denominated 4.1% bond maturing in 2031 was little moved on Monday, trading at around 95.43 cents on the dollar.
