Google-owner Alphabet’s century bond flags new AI arms race debt fears

Alphabet‘s rare 100-year sterling bond is the latest sign of late-cycle exuberance in credit markets, strategists say, as tech hyperscalers ramp up borrowing to historic levels to fund vast data center and AI infrastructure buildouts.

The century bond — the Google-owner’s debut issuance in sterling — is part of a broader multi-tranche, multi-currency borrowing drive totaling some $20 billion. The offering spans maturities across dollars, euros and sterling, and includes a debut bond in Swiss francs.

Century bonds remain rare, and are more commonly associated with governments than corporate borrowers. Demand typically comes from large institutional investors such as pension funds and insurers seeking to match long-term liabilities.

Alphabet joins a small group of sterling-denominated century bond issuers, including the University of Oxford, the Wellcome Trust, EDF Energy and the government of Mexico.

The 100-year bond attracted almost 10 times orders for the £1 billion ($1.37 billion) sale on Tuesday, with the coupon reaching 120 basis points above 10-year gilts, according to a report from Bloomberg, which cites anonymous sources.

Bill Blain, CEO of Wind Shift Capital, said the deal is reflective of the “off-the-historical scale” levels of debt now being raised in both public and private markets to finance AI expansion.

Alphabet said last week that its capex spend is expected to hit $185 billion this year.

“I give them full credit for taking advantage of the opportunity that existed to sell a moderately high coupon 100-year bond,” Blain told CNBC in an interview. “They clearly identified demand… that this was what U.K. insurance and pension funds wanted to cover their liabilities.”

But with credit spreads at historically tight levels, long-term data center demand uncertain, and rapid technological change set to create winners and losers in the sector, Blain said the deal offers further proof of market froth around AI.

“Firms that have spotted the opportunity and been able to fill it — they’ve spotted the opportunity because there is froth there that’s getting people excited about being involved in that,” he said.

“I think the fact that a 100-year bond comes out, you can’t get much more frothy than that. If you’re looking for a signal of a top — even if it’s a brilliantly-executed deal — it does look a bit like a signal of a top, absolutely.”

As rivals including Oracle, Amazon and Microsoft also scale up infrastructure spending — with tech giants’ total debt issuance predicted to reach some $3 trillion over five years — strategists say the century bond also broadens Alphabet’s lender base.

“It’s interesting that Alphabet is lining up this GBP issuance at the very long end of the market to fund their AI capex,” said Nachu Chockalingam, head of London credit at Federated Hermes. “They are looking to tap into insurance and pension demand, and diversity funding sources to…