Amazon has launched a major bond sale through which it has successfully raised $15 billion.
The sale highlights the intensifying competition among Big Tech firms to secure massive funding for AI infrastructure amid surging demand for compute power, data centers, and electricity needed to keep them running.
Amazon’s first bond sale in three years
Reports claim the initial target of the sale was around $12 billion; however, the amount was subsequently increased to $15 billion due to massive investor interest, and it eventually peaked at around $80 billion.
The deal is made up of investment-grade notes that are to be issued in six parts, and they have maturities ranging from short-term to a 40-year bond, the longest portion, tightened to 0.85 percentage points above Treasuries.
Goldman Sachs, JPMorgan Chase, and Morgan Stanley were reportedly tasked with managing the offering, and Amazon has revealed plans to use the proceeds, which topped initial estimates by $3 billion, for a variety of corporate purposes ranging from acquisitions and capital expenditures to share buybacks and the repayment of its maturing debts.
The last time Amazon held a bond sale in the U.S. was in 2022, and at that time, despite the high interest rates, it raised $8.25 billion. The difference in the amounts raised between then and now can be traced to the more favorable environment the recent bond sale has benefited from, as well as heightened investor appetite for debt linked to AI operations.
With the amount it was able to raise through this sale, Amazon will be able to accelerate its push into the AI sector without breaking the bank or straining its balance sheet.
Big Tech ramps up AI investments
Amazon’s bond offering is happening as more big tech firms rush to develop AI infrastructure. These big technology firms have been turning to debt sales worth tens of billions of dollars to fund their various ambitions.
Last month, Meta Platforms announced what is being touted as its biggest bond sale of up to $30 billion, while cloud infrastructure and software maker Oracle is also reportedly looking to raise $15 billion in bond sales.
Also, earlier this month, Google parent Alphabet Inc. sold $25 billion of debt in the U.S. and Europe, while Meta issued $30 billion of corporate bonds last month, the biggest such offering of the year, and Oracle Corp. raised $18 billion through high-grade notes in September.
In total, the major tech firms, including Meta, Amazon, and Alphabet, are expected to spend $400 billion on AI infrastructure this year.
Already, Amazon has leveled up its spending on AI, with its capital expenditure expected to cross into the $125 billion region this year and more the year after. It has announced a $38 billion deal with OpenAI, which is expected to give its cloud unit a nice boost as it struggles against Microsoft.
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