Google-parent Alphabet, Inc. (GOOGL) plans to sell at least €3 billion (US$3.5) in bonds in Europe to finance its potential $93 billion investment in cloud infrastructure and artificial intelligence.
The bond’s issuing coincides with a surge in demand for Alphabet’s cloud services and AI division. According to the company’s recent financial report, sales increased to US$87.5 billion in the third quarter, with revenue from generative AI-driven products rising by more than 200% annually.
Alphabet accelerates AI growth with record spending
The tech giant is making record capital expenditures, which are anticipated to reach between $ 91 billion and $ 93 billion annually, to support its business growth. BNP Paribas, Crédit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC, and JPMorgan serve as joint global coordinators and bookrunners. The price will be announced later today.
According to a Bloomberg report, the tech giant is promoting six benchmark tranches in euros, with maturities ranging from three to 39 years. Earlier this year, Alphabet unveiled a multi-tranche 6.75 billion euro sale that generated significant interest. The report revealed that Google’s parent company’s goals for developing artificial intelligence, which include investing in increasing the capacity of its data center, would be financed mainly by debt raising.
The trend aligns with recent financial reports from U.S. big tech companies, including Microsoft, Amazon, Alphabet, and Meta, which indicate increased capital expenditures for the upcoming year. Additionally, Morgan Stanley expects large companies to invest approximately $3 trillion in data centers and other infrastructure between 2025 and 2028, with cash flows accounting for about half of that total.
According to Chief Financial Officer Anat Ashkenazi, Alphabet views investing in AI as essential to competing with major cloud computing rivals, such as Microsoft and Amazon.com Inc. Ashkenazi revealed that servers accounted for over 60% of the company’s capital expenditures in the most recent quarter. The remaining funds were allocated to data centers and networking equipment that support the company’s growing AI operations.
Alphabet’s cloud division has landed major agreements with AI start-ups, including a high-profile, multibillion-dollar contract to provide specialized AI processors to Anthropic. Since the entity is smaller than Microsoft’s Azure and Amazon’s AWS, it is anticipated to grow faster. The cloud unit’s sales increased 33.5% year over year to US$15.2 billion, compared to the estimated US$11.4 billion.
Google Cloud exceeded experts’ projections of $3 billion in operational profits, achieving a profit of $3.59 billion. Google Cloud reportedly has contracts worth US$155 billion that it has not yet completed.
According to CFRA Research analyst Angelo Zino, Google maintained its profitability through a cloud backlog that provided investors with “strong visibility into future performance.” He claimed that overall, the quarter “demonstrates effective use of spending.”
Tech giants pour billions into AI
Alphabet is not the only tech firm issuing bonds for AI expansion. Last week, Meta engaged Morgan Stanley and Citigroup to be ready for a US$25 billion bond issuance with maturities ranging from five to forty years.
On October 24, Oracle’s data center announced the “largest-scale financing for AI infrastructure,” totaling US$38 billion. As part of Oracle’s $500 billion AI infrastructure investment plan, Stargate, which is being shared with OpenAI, this funding will support two projects created by Vantage Data Centers that Oracle will eventually utilize to satisfy OpenAI’s processing power requirements.
Today, IREN (IREN) announced that it has reached an agreement with Microsoft (MSFT) for multi-year Graphics Processing Unit (GPU) cloud services, valued at approximately US$9.7 billion. IREN will grant Microsoft access to Nvidia (NVDA) GB300 GPUs for a period of five years, with a 20% prepayment included in the agreement.
IREN stated that it has reached an agreement with Dell Technologies to pay roughly US$5.8 billion for the GPUs and related equipment. According to the IREN, the GPUs will be installed at IREN’s 750MW site in Childress, Texas, in stages until 2026.
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