This article first appeared on GuruFocus.
Alphabet Inc. (GOOGL, Financials), the parent firm of Google, is planning for another significant bond offering as the expenses of competing in artificial intelligence keep climbing.
The corporation is aiming to raise up to $25 billion thru a U.S. debt issue, said a source familiar with the arrangement. The agreement may have maturities ranging from two to 40 years.
The funding arrives as Alphabet is pouring money into data centers, CPUs and other infrastructure required to power Gemini, Google Cloud and its wider AI strategy.
Those investments are beginning to change the company’s cash profile. Capital spending rose in the second quarter, which left Alphabet with negative free cash flow.
Alphabet is no exception. Tech companies like Amazon, Meta and Oracle have increasingly turned to bond markets to pay for an unprecedented AI buildout in the industry.
Cheap, investment-grade debt is allowing Alphabet to keep spending without curbing expansion. Investors will be looking for evidence that the investment in AI is starting to pay off quickly enough to support the increasing financing needs in future capital expenditure and free cash flow.
