Alphabet is raising €6 billion ($6.7 billion) through a euro-denominated bond sale, testing investor demand for technology debt as concerns over the cost and profitability of artificial intelligence investments continue to unsettle equity and credit markets.
The Google parent is offering the bonds in seven tranches, with total investor demand exceeding €17 billion, according to a memo from one of the banks managing the transaction that was reviewed by Reuters. The bonds are expected to be priced later on Monday, with maturities ranging from two to 19 years.
The offering includes six fixed-rate tranches and one floating-rate tranche, according to a filing with the US Securities and Exchange Commission.
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The level of demand suggests investors remain willing to provide financing to large technology companies, even as questions grow over the scale of borrowing and capital expenditure required to build AI infrastructure. However, the final pricing and borrowing costs will provide a clearer indication of how investors are assessing Alphabet’s credit risk and the wider technology sector.
The transaction is Alphabet’s second euro-denominated bond sale this year. In May, the company raised €9 billion through six tranches, following a rare 100-year sterling bond offering in February.
Barclays, BNP Paribas and Deutsche Bank are the joint book-running managers for the latest sale.
Alphabet said it intends to use the net proceeds for general corporate purposes, which may include repaying existing debt. The company has not tied the fundraising exclusively to AI infrastructure, although its expanding investment programme has increased the importance of external financing and balance-sheet management across the technology sector.
Investor concerns about the financing requirements of AI development and the returns needed to justify the expenditure have contributed to recent volatility in technology stocks and bonds.
The Nasdaq Composite, which is heavily weighted towards technology companies, fell 5% in October as investors reassessed the outlook for companies committing hundreds of billions of dollars to data centers, computing equipment and related infrastructure.
The latest market pressure followed quarterly results from Alphabet and Amazon, two of the largest investors in data-center infrastructure. Alphabet’s results particularly unsettled investors after the company reported slower-than-expected growth in Google Search and cash burn that raised questions about the financial demands of its AI expansion.
Alphabet shares fell more than 12% last Thursday, their steepest single-day decline on record, wiping out approximately $500 billion in market value. The stock was up about 1% in premarket trading on Monday, although its US-listed shares had fallen nearly 19% in October, marking their worst monthly performance on record.
The company expects capital expenditure of as much as $205 billion for the full year. That spending reflects the scale of investment required to expand computing capacity and support growing demand for AI services.
Beyond its planned capital expenditure, Alphabet has substantial future infrastructure commitments. As of September 30, it had signed leases, mainly for data centers, involving future payments of $130.5 billion that had not yet commenced and were therefore not recorded on its balance sheet, according to the SEC filing.
These commitments matter because the cost of building AI capacity extends beyond immediate purchases of servers and equipment. Long-term leases create future payment obligations that can constrain cash flow even before the associated facilities become operational.
The scale of these commitments has intensified scrutiny of whether revenue from AI products and services will grow quickly enough to justify the investment. Alphabet’s advertising business remains a major source of cash generation, but investors are also assessing whether AI-powered search and other products can sustain that business while requiring significantly higher infrastructure spending.
European Bond Markets Attract Big Tech Borrowers
Alphabet’s latest offering also comes as major technology companies are expected to increase borrowing in Europe to finance infrastructure expansion.
European debt markets provide access to a deep pool of institutional investors and allow large US companies to diversify their funding sources across currencies and maturities. The strong initial demand for Alphabet’s bonds indicates that the company retains access to substantial investor capital, although demand alone does not establish whether investors are comfortable with every aspect of its AI spending plans.
The contrast between cash generation and investment requirements has become a central issue in the sector. Microsoft was the only major technology company among its peers generating cash in the quarter, according to the report, highlighting the pressure that infrastructure expenditure can place on operating cash flow.
Alphabet’s existing debt securities have also faced market scrutiny. Its US dollar-denominated bond carrying a 4.1% coupon and maturing in 2031 was little changed on Monday at approximately 95.43 cents on the dollar.
The bond sale therefore comes at a time when investors are weighing two competing considerations: the financial strength and borrowing capacity of large technology companies, and the uncertainty surrounding the returns on their expanding AI infrastructure investments.