Tony Trzasinka, a US-based senior portfolio manager at Impax Asset Management, which bought Alphabet’s bonds last year, said he abandoned Monday’s offering due to concerns about inadequate yields and overexposure to companies with complex financial obligations tied to AI investments.
“It wasn’t worth it to replace new people,” Trzasinka said. “We are very conscious of our exposure to these hyperscalers and their capital expenditure budgets.”
Big tech companies and their suppliers are expected to invest nearly $700 billion in AI infrastructure this year and are increasingly turning to debt markets to finance massive data center construction.
In November Alphabet sold $17.5 billion of bonds in the US, including a 50-year bond – the longest-dated dollar bond sold by a tech group last year – and raised €6.5 billion in European markets.
Last week Oracle raised $25 billion in a bond sale, bringing orders to more than $125 billion.
Alphabet, Amazon and Meta all increased their capital spending plans during their recent earnings reports, raising questions about whether they will be able to finance the unprecedented spending from their cash flow alone.
Last week, Google’s parent company reported annual sales that exceeded $400 billion for the first time, beating investors’ expectations for revenue and profits in the most recent quarter. It said it planned to spend up to $185 billion on capital expenditures this year, nearly double last year’s total, to capitalize on growing demand for its Gemini AI assistant.
Alphabet’s long-term debt is set to rise to $46.5 billion by 2025, more than four times the previous year, although it had cash and equivalents of $126.8 billion at year end.
People familiar with the deal said investor demand was strongest in the smallest portion of Monday’s deal, which offered pricing only 0.27 percentage points above three-year U.S. Treasuries, compared with 0.6 percentage points during initial price discussions.
The longest portion of the offering, a 40-year bond, is expected to fetch 0.95 percentage points over U.S. Treasuries, down from 1.2 percentage points during early talks, the people said.
Bank of America, Goldman Sachs and JPMorgan are the bookrunners of the bond sale in the three currencies. All three declined to comment or did not immediately respond to requests for comment.
Alphabet did not immediately respond to a request for comment.
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