Alphabet, the parent company of Google, announced on Monday that it plans to issue approximately $6.7 billion in new debt. This move is part of a broader trend among big tech firms looking to finance their AI infrastructure investments. However, the notable aspect of Alphabet’s decision is that it is issuing these bonds in Europe rather than the U.S.
Alphabet is not alone in this strategy. Meta, the parent company of Facebook, is reportedly considering a significant euro-denominated debt sale later this week. According to Randy Vogel, head of fixed income at Wilmington Trust, the shift to European markets is driven by the sheer volume of debt already issued in the U.S. by tech giants like Microsoft and Oracle.
John Bai, a finance professor at Northeastern University, explained that many tech companies generate substantial revenue in Europe. Issuing debt in euros allows these companies to avoid currency conversion complexities and volatile exchange rates. Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, added that this approach helps reduce financial volatility.
Another key factor is cost. Winnie Cisar, global head of strategy at CreditSights, noted that interest rates on corporate debt in Europe can be more than 1.5% lower than in the U.S. This cost advantage is particularly appealing as broader interest rates continue to rise. Cisar warned that if rates keep climbing, investors may grow more concerned about a company’s ability to repay its debt, potentially demanding higher interest rates in response.