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The Blueprint<\/p>\n
Alphabet<\/a> and Amazon<\/a> are issuing record amounts of debt in international markets. LONDON \u2014 From Europe to Japan and Switzerland, huge bond issues by Big Tech companies are proving that smaller markets, often overshadowed by the U.S., can punch above their weight in the $40 trillion world of corporate debt.\n<\/p>\n Google-parent Alphabet is already one of the biggest outstanding borrowers in the euro, sterling, Swiss franc and yen corporate bond markets. Amazon raised $16.88 billion in March from an eight-part deal, the largest ever in the euro corporate bond market, according to LSEG.\n<\/p>\n Debt issues by so-called \u201chyperscalers\u201d \u2014 or Big Tech companies \u2014 outside the United States this year are part of a push to diversify their funding early on, bankers said, as they look to finance trillions of dollars of investment in AI infrastructure<\/a>, especially data centers<\/a>, in the years ahead.<\/p>\n Raising debt in foreign currencies can also help the companies hedge the currency risk from their global assets, while taking advantage of relatively lower borrowing costs in places like Europe.\n<\/p>\n Alphabet smashed records across markets, with its yen, Canadian dollar, Swiss franc and sterling deals all setting borrowing records in those currencies.\n<\/p>\n \u201cIf you look at the pace of investment of these companies and if you fast forward 12 months, some of these companies are already going to become among the biggest issuers globally in any currency,\u201d said Giulio Baratta, co-head of investment-grade finance at BNP Paribas.<\/p>\n In Europe, Alphabet and Amazon have helped push up borrowing by non-financial U.S. firms to over $69.85 billion this year, another record.\n<\/p>\n Record debt sales<\/p>\n Morgan Stanley expects around $58 billion of total borrowing from the hyperscalers in debt this year, which could help lead the U.S. to overtake France as the euro zone\u2019s biggest source of overall corporate debt.\n<\/p>\n \u201cA lot of these markets, including euro, have evolved and now offer a lot more depth and opportunity for larger capital raising than was historically the case,\u201d said John Servidea, global co-head of investment grade finance at JPMorgan, which led recent deals for the two hyperscalers.\n<\/p>\n With the hyperscaler deals, internationally placed non-financial corporate bond sales tracked by LSEG have surged in markets like the Swiss franc and yen this year.\n<\/p>\n The ability to raise significant amounts of money in such markets has not gone unnoticed by U.S. companies beyond the hyperscalers, Servidea said.\n<\/p>\n \u201cThey\u2019re definitely looking at other markets more seriously than they would have previously.\u201d\n<\/p>\n More broadly, borrowing has also surged in currencies like the Australian and Hong Kong dollars as international companies diversify their funding sources.\n<\/p>\n Investors, meanwhile, have shifted focus to diversifying away from the U.S. dollar given geopolitical tensions and policy uncertainty.\n<\/p>\n Building exposure to AI<\/p>\n Hyperscalers have seen their non-dollar issuance double to 30% of their total bond funding this year, according to Bank of America.\n<\/p>\n Raising money abroad also means Big Tech can leave longer periods between tapping the U.S. market, JPMorgan\u2019s Servidea said, while borrowing at rates that are in some cases cheaper than the U.S. dollar market, or at least similar.\n<\/p>\n Heavy borrowing can weigh on a borrower\u2019s bonds, and analysts see signs that hyperscalers are underperforming the U.S. corporate bond market. Visiting it less often may help limit the hit.\n<\/p>\n Baratta at BNP Paribas, which also led deals for Alphabet and Amazon, said these companies were mainly keeping the funds in the currency they are raising rather than swapping them back to dollars.\n<\/p>\n As for investors, they\u2019re keen to build exposure to the AI theme in international bond markets, where technology names previously had a limited presence.\n<\/p>\n Nicolas Forest, chief investment officer at Candriam, for example, is buying into the euro deals from hyperscalers to build exposure to the tech sector in the European bond market.\n<\/p>\n Alphabet has already become the seventh-biggest borrower in ICE BofA\u2019s non-financial euro corporate bond index and the fourth-largest in its sterling corporate index, as of May 31.\n<\/p>\n It is also among the top 10 borrowers in ICE BofA\u2019s Swiss franc and yen corporate indexes, while Amazon has risen to eighth place in Swiss francs.\n<\/p>\n As tech issuance grows, corporate bond markets outside the U.S. will become more exposed to tech sector developments, in good and bad times.\n<\/p>\n
\nBig Tech<\/a> firms are diversifying funding sources to support massive AI and data center investments.
\nNon-dollar bond issuance<\/a> by hyperscalers<\/a> has doubled to 30% of their total bond funding this year.
\nInvestors are using corporate bonds<\/a> to gain exposure to the growing AI sector outside the U.S.<\/p>\n