Alphabet Eyes First Aussie Dollar Bond to Fund AI Ambitions

Alphabet Inc is considering its first Australian dollar bond issue to fund investments in artificial intelligence (AI). The company has hired banks for a potential debut offering of Australian dollar bonds, with maturities ranging from four years to 20 years. This move comes after Alphabet priced US$25 billion of bonds in the US dollar market earlier this month and raised nearly US$85 billion through an equity offering.

The tech giant is not alone in its AI ambitions, as other US peers like Meta Platforms Inc and Amazon.com Inc have also raised hundreds of billions of dollars to fund their investments. However, signs of investor fatigue are emerging after the onslaught of deals, with investors pulling about 36% of their initial orders for bond sales on average last week.

Helen Mason, head of credit at Schroders' Australian unit, warned that there is a structural mismatch between the capital expenditure commitments and the free cash flow generation of the underlying businesses. She emphasized the importance of assessing whether the new issuance is fairly priced for the risk inherent in the issuer and the sector as a whole.