Alphabet launches $11 billion 100-year bond for AI funding
Alphabet Inc, the parent company of Google, is currently engaged in one of the largest bond sales by a technology company in recent years. The company is securing over $11 billion via bonds denominated in sterling and Swiss francs, which includes a unique 100-year bond, referred to as a “century bond.” The decision follows closely on the heels of Alphabet’s recent $20 billion multi-part US dollar bond sale, which attracted an unprecedented level of demand for a corporate offering. A 100-year bond is a financial instrument that reaches maturity after a century. This indicates that the issuer — typically a government or corporation — commits to paying interest on a regular basis and to repaying the principal amount after a century. Such bonds are exceptionally uncommon in the corporate realm. Data indicates that Alphabet’s 100-year note marks the first sale of its kind by a technology firm since Motorola issued one in 1997. The market for century bonds is predominantly controlled by governments and institutions like universities. For companies, extended maturities introduce additional uncertainty as businesses can undergo significant transformations over the course of decades. Governments and companies issue 100-year bonds to capitalize on favorable market conditions, particularly when interest rates are low. By securing borrowing costs for a century, issuers are able to extend repayment obligations across an extensive timeframe.
Institutional investors, including pension funds and insurance companies, frequently purchase these bonds to align with their long-term liabilities. Pension funds, for instance, are required to make payouts over extended periods, which is why long-dated bonds are instrumental in aligning assets with future obligations. In certain instances, century bonds serve a purpose in estate planning, enabling the structuring of wealth across generations. Alphabet’s ongoing borrowing spree follows its announcement that capital expenditure could soar to as much as $185 billion this year — a figure that is double last year’s spending — primarily to support its AI ambitions. Other technology firms have also revealed substantial spending plans for 2026. Morgan Stanley anticipates that borrowing by large cloud computing companies, referred to as hyperscalers, will reach $400 billion this year, a significant increase from $165 billion in 2025. Alphabet’s offering is anticipated to reach £5.5 billion ($7.5 billion), marking a record for the UK market. It encompasses maturities that span from three to 32 years, in addition to the 100-year bond. The company reportedly attracted a record £30 billion in bids, according to the report. The Swiss franc deal is set to amount to at least 2.75 billion francs ($3.6 billion) across various maturities. Both offerings come in the wake of the $20 billion US dollar bond sale that was finalized earlier this week. There has been a clear indication of strong demand. A £1 billion tranche has reportedly attracted £9.5 billion in orders and is poised to price at 120 basis points above UK government bonds (gilts). The shortest £750 million tranche is set at a price of 45 basis points above the benchmark.
However, analysts caution that such substantial borrowing needs may exert pressure on bond valuations as time progresses. Alphabet has also raised €6.5 billion in the euro bond market as recently as November, positioning itself as one of the largest borrowers in Europe in 2025. In recent years, no Indian company has issued a genuine 100-year domestic bond. In 1997, Reliance Industries successfully raised $100 million through a 100-year external commercial borrowing. The issue was oversubscribed to $250 million and priced at 380 basis points above US Treasury rates. Life Insurance Corporation of India has requested approval from the Reserve Bank of India to issue bonds with maturities of 50 and 100 years in order to align with its long-term insurance liabilities. Although it has obtained approval for 40-year bonds, century bonds have yet to be issued. Century bonds present considerable risks, particularly for investors. Interest rate risk: If interest rates rise, the value of long-term bonds can fall sharply. Over a century, the probability of significant rate cycles is considerable. Credit risk: Investors encounter the potential that the issuer might default many years in the future. Call risk: Numerous bonds of this nature are callable, indicating that the issuer has the option to repay them ahead of schedule. This may restrict investor profits should interest rates decline. Business risk: Corporate models may become obsolete as a result of technological advancements or mergers and acquisitions.
In 1996, IBM issued a 100-year bond during its peak dominance in the tech industry; however, the rise of competition from Microsoft and Apple quickly diminished its standing. Retailer JC Penney issued $500 million in century bonds in 1997; those bonds subsequently traded at significant discounts following the company’s bankruptcy filing 23 years later, as reported. Investors generally obtain a consistent interest payment throughout the duration of the bond. The extended maturity typically results in yields that surpass those of shorter-term government bonds, providing a premium for committing capital over a longer duration. However, returns are significantly influenced by interest rate movements, inflation trends, and the issuer’s long-term financial health.
