Alphabet issued a century-long pound bond for the first time, with a subscription multiple exceeding 7 times

Alphabet, the parent company of Google, recently issued a century-long bond in pounds for the first time, receiving more than seven times the oversubscription in the market. This marks a new phase in the debt financing of tech giants competing for dominance in artificial intelligence. It is also the first time since the dot-com bubble that a tech company has attempted to issue such a long-term bond.

On February 10, Bloomberg reported that the £750 million century bond received £5.75 billion in subscription orders, making it the strongest demand among the five pound bonds issued by Alphabet on the same day. This bond is part of the company's overall financing plan, which previously included the issuance of dollar bonds and subsequent entries into the Swiss franc and pound markets to raise funds for AI capability development through multiple channels.

Century bonds are extremely rare among non-government issuers, as they require companies to have the ability to endure across economic cycles and maintain financial stability. The issuance of such ultra-long-term financing tools highlights that tech giants are adopting financing methods previously seen in governments, universities, and other institutions to support their strategic investments.

Challenges of Ultra-Long Terms

The issuance of century bonds in the tech industry faces unique long-term uncertainty challenges. Song Jin Lee, a credit strategist at HSBC for Europe and the Americas, pointed out that while the tech industry as a whole will continue to exist, the market position ranking of specific companies is highly unpredictable. He stated:

“It is difficult to predict how the AI ecosystem will evolve in five years, let alone the landscape a hundred years from now.”

However, Song Jin Lee also acknowledged that there are indeed institutional investors in the market that hold long-term liabilities and have a demand for such ultra-long bonds to achieve asset-liability term matching.

Looking back at history, since Google was founded about 28 years ago, the tech industry has undergone profound changes. In 1998, co-founders Larry Page and Sergey Brin officially established the search engine company after receiving a $100,000 investment. In its early stages, this startup operated out of a garage in Menlo Park, California, relying on desktop computers to support its business.

Ultra-long terms have a significant impact on bond prices. Austria's issuance of a century bond in 2020 provides a vivid example: the bond was issued with a coupon rate of less than 1%, benefiting from the low interest rate environment at the time; however, according to Bloomberg data, its trading price has now fallen below 30% of its face value. This case illustrates that significant changes in the interest rate environment can have a huge impact on the prices of ultra-long bonds.

AI Competition Drives Financing Demand

Alphabet expects to raise approximately $9.4 billion through the issuance of pound and Swiss franc bonds, reflecting the significant expansion of financing needs as tech giants compete for dominance in the field of artificial intelligence. To build and maintain leading AI capabilities, such companies need to continuously invest substantial capital, and the bond market has become one of their key financing channels.

The successful issuance of century bonds indicates that, despite facing uncertainties in the long-term development of the industry, investors still have ample confidence in tech giants like Alphabet, which have solid balance sheets and core cash flows, and are willing to provide long-term funding support that spans economic cycles