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2026-11-03 20:42:25
[Tech Giants Rally in AI with Debt, Rising Financing Costs Undeterred] ⑴ Large tech companies continue to flood the bond market, with Alphabet, Microsoft, Meta, and Oracle all preparing billions of dollars in new debt, showing no signs of cooling down the debt-driven boom surrounding artificial intelligence. ⑵ As AI development increasingly relies on borrowed funds, lenders are starting to raise fees, but this doesn't seem to deter companies from continuing to raise capital. ⑶ Alphabet plans to raise €6 billion (approximately $6.7 billion) through its second euro-denominated bond issuance this year, with yields higher than its previous euro-denominated bond issuance in May. ⑷ Meta is reportedly considering issuing another $20 billion in debt, and last week also announced plans to issue up to nearly $100 billion in stock. ⑸ Microsoft stated last week that it expects to raise $25 billion through a bond issuance. ⑹ Oracle has applied to raise $20 billion, half in stock and half in bonds, stating that combined with its cash reserves, it can support its AI business to achieve self-sufficiency by May 2029. (7) Moody's maintained Oracle's rating two notches above junk status on Monday, with a negative outlook, meaning a downgrade is more likely than an upgrade. (8) Alphabet's credit default swaps (CDS) have nearly tripled in the past year, rising to 91.6 basis points last week, meaning a $10 million debt insured for five years would cost $91,600 annually. (9) Microsoft's CDS have nearly doubled, but Oracle's CDS have risen significantly from less than 100 basis points last year to 294.4 basis points. (10) Oracle just told investors last week that it would raise a maximum of $20 billion in new capital market funding by fiscal year 2030, and on Monday applied to raise the full amount. (11) PitchBook corporate bond analyst Atkins said this reflects that the development of artificial intelligence is progressing in real time, rather than according to a predetermined plan. (12) Atkins pointed out that Oracle's February bond coupon rate was 6.7%, while similar bonds now trade at 8.3%, indicating a significant increase in financing costs.
