Alphabet (GOOGL) Stock: Why This 100-Year Bond Has Credit Markets Worried

TLDR

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Alphabet launched a rare 100-year sterling bond worth £1 billion, drawing 10 times oversubscription from institutional investors seeking long-term assets.
The century bond is part of a $20 billion multi-currency debt package to finance AI infrastructure as Alphabet’s 2026 capex hits $185 billion.
Market analysts warn the deal indicates late-cycle market exuberance as tech companies plan $3 trillion in debt issuance over five years.
Credit spreads have reached their tightest levels since 1998, raising concerns about overlending to technology companies in the AI race.
The bond’s coupon was set at 120 basis points above 10-year gilts, with demand primarily from pension funds and insurance companies.

Alphabet issued a historic 100-year sterling bond on Tuesday that has credit market strategists sounding alarm bells. The rare century bond attracted nearly 10 times the orders for the £1 billion ($1.37 billion) offering.

Alphabet Inc., GOOGL

The deal forms part of a massive $20 billion borrowing program. The multi-currency package spans dollars, euros, sterling, and includes Alphabet’s first Swiss franc bond.

Century bonds remain extraordinarily rare for corporate issuers. Alphabet joins an elite group including the University of Oxford, the Wellcome Trust, and Mexico’s government.

The 100-year bond’s coupon landed at 120 basis points above 10-year gilts. Pension funds and insurers provided the bulk of demand as they match long-term liabilities.

Tech Debt Reaches Historic Levels

Bill Blain, CEO of Wind Shift Capital, described current debt levels as “off-the-historical scale.” Alphabet announced last week that capex spending will reach $185 billion in 2026.

The company isn’t alone in its borrowing spree. Oracle, Amazon, and Microsoft are ramping up infrastructure spending at breakneck pace.

Total tech debt issuance could hit $3 trillion over the next five years. That represents a fundamental shift from capital-light software to capital-heavy AI infrastructure.

“I give them full credit for taking advantage of the opportunity,” Blain told CNBC. “They clearly identified demand from U.K. insurance and pension funds.”

But he warned the deal signals dangerous market froth. “You can’t get much more frothy than a 100-year bond,” Blain said. “If you’re looking for a signal of a top, it does look like one.”

Credit Markets Flash Warning Signs

Credit spreads have compressed to historically tight levels. Corporate yields over Treasurys hit their lowest point since Coca-Cola’s 1998 century bond.

That timing matters. Century bonds typically appear when money is easy and investors chase yield.

The first wave came in the late 1990s before Long-Term Capital Management collapsed. The second wave arrived during zero interest rates and ended badly.

Austria’s zero-coupon 100-year bonds from 2020 now trade at just 5% of issue value. Argentina defaulted on its century bonds after only three years.

Nachu Chockalingam, head of London credit at Federated Hermes, said Alphabet is diversifying funding sources. “They are looking to tap into insurance and pension demand to avoid over-saturating the USD market,” he said.

AI Race Intensifies Competition

Alphabet sits on $126 billion in cash and marketable securities. The company maintains an AA+ credit rating and borrows less than half its cash pile.

But the AI business model remains uncertain. Alphabet’s Gemini chatbot faces fierce competition from OpenAI’s ChatGPT, Anthropic’s Claude, and Chinese developers.

If businesses prefer low-cost open-source models, current leaders could struggle. There’s also risk that AI disrupts traditional web search and undermines Alphabet’s core revenue.

The century bond’s duration is just under 17 years. That means it behaves like conventional 40-year bonds from Oracle, Cisco, Intel, and Apple.

The final principal payment represents only 0.28% of present value. What matters are the interest payments over coming decades.

Investors remain eager to finance tech AI spending. But as borrowing accelerates, the industry may hit limits that push yields higher across the sector.

The oversubscribed offering shows pension funds and insurers have appetite now. The question is whether that appetite persists as tech debt piles up.

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