Alphabet’s Century Bond May Signal Big Tech Relying More on Debt to Fund AI Buildout

From solid balance sheets to debt sales, funding of the AI expansion could be evolving.

Google headquarters in Mountain View, Calif., on July 31, 2025. John Fredricks/The Epoch Times

Alphabet, Google’s parent company, sold a rare 1 billion British pound ($1.37 billion) 100-year bond offering on Feb. 10, possibly signaling a debt-fueled arms race in the artificial intelligence (AI) industry.

Technology companies have leaned on their balance sheets to bankroll the buildout of AI infrastructure, but they are increasingly tapping debt markets to fund AI capacity, highlighting their optimistic view of returns in the coming years.

Days before the blue-chip Dow Jones Industrial Average hit the key 50,000 milestone, the tech sector suffered a sharp selloff as scores of companies announced plans to boost AI-related capital expenditures.

Hyperscalers, from Alphabet to Microsoft, said they would increase their collective capex spending to nearly $700 billion in the year ahead.

Investors frowned, wiping out billions from market valuations.

The leading benchmark averages have stabilized, but market watchers are now sniffing around capital markets for any financing gaps in the AI buildout.

This past summer, Morgan Stanley estimated that credit markets could fund a financing shortfall of approximately $1.5 trillion.

Since the beginning of the AI boom, Big Tech has relied on operating cash flows to power its AI buildout.

While UBS expects the likes of Amazon and Alphabet to continue relying on their balance sheets, those firms are also beginning to issue corporate bonds to meet demand for computing resources.

“We view this mix of funding approaches as healthy,” UBS strategists said in a November note, adding that these companies still maintain strong fundamentals and hold more cash than debt.

In recent months, these tech juggernauts have been on a debt-raising spree.

Oracle said earlier this month that it plans to raise up to $50 billion to construct additional AI capacity.

Alphabet enhanced the size of its bond offering to more than $30 billion last week.

Amazon issued its first $15 billion bond offering since 2022 in November.

A growing number of other companies are also planning to join the fray.

“We will continue to look for opportunities to periodically supplement our strong operating cash flow with prudent amounts of cost-efficient external financing, which may lead us to eventually maintain a positive net debt balance,” Meta CFO Susan Li told analysts in a Jan. 28 earnings call.

But this could create two new trends in global financial markets: a crowding-out effect and greater nervousness about a possible AI-fueled bubble.

At a time when investors are gradually shifting away from technology names—the tech-heavy Nasdaq Composite Index fell more than 1 percent during the Feb. 12 trading session—the bright outlook for AI may dim.

Substitutions and Bubbles

Dallas Federal Reserve economists say increasing debt issuance among AI hyperscalers could replace supply from other investment-grade issuers, “including financial firms that are currently the dominant issuers in the investment grade market.”

In addition, they warn of risks to long-term interest rates based on how data centers are being financed, such as by century bonds.

OpenAI's ChatGPT app (Center 2nd R) and icons of other AI apps on a smartphone screen in Oslo, Norway, on July 12, 2023. Olivier Morin/AFP via Getty Images

Alphabet’s 100-year bond sale came shortly after the search engine behemoth forecast its capex spending would reach $185 billion this year.

While governments are more associated with issuing century bonds, companies are expected to issue more long‑maturity bonds and use interest‑rate swaps to convert their short‑term floating borrowing into longer‑term fixed obligations.

“It’s interesting to consider why Google views a 100-year bond as attractive right now,” Christian Hoffmann, head of fixed income at Thornburg Investment Management, said in a note emailed to The Epoch Times.

“Google could be thinking several things, such as that there are tax considerations or questions about their long-term access to capital markets and their ability to refinance even at low spread levels.”

At the same time, those issuing century bonds could displace the traditional financial institutions that typically purchase long‑duration assets to offset their own liabilities.

But the borrowing surge and 100-year bonds have also exacerbated bubble fears—or at least may signal a market top.

Over the past several months, investors have turned to credit default swaps—insurance that kicks in if a borrower cannot repay its debt—to hedge against downside risks in AI investments.

“Since June, the cost of insuring hyperscaler debt through CDS has increased, reflecting heightened credit risk and increased sensitivity to the execution of substantial capital expenditure plans,” BNY Mellon strategists said in a December research note.

With AI debt and financing needs accelerating, there will likely be heightened demand for hedging to shield investors from the dangers associated with large, long-term AI spending commitments.

“Considering a 100-year time horizon for an industrial manufacturer is very different from a 100-year time horizon for a technology company,” Hoffmann added.

In the end, it could be an opportunity for investors, as an influx of supply will force companies to offer higher compensation rates to compete for traders’ attention—and money.