Alphabet turns to yen for AI funding

Alphabet is preparing its first yen-denominated bond sale as the Google parent broadens its financing base to support a sharp increase in artificial intelligence spending, underscoring how the world’s largest technology groups are moving beyond domestic debt markets to fund the infrastructure race.

A term sheet shows the planned multi-tranche offering may include notes with maturities of three, five, seven, 10, 15, 20, 30 and 40 years, though one or more tranches could be dropped depending on investor demand and market conditions. The size has not been disclosed, but people familiar with the transaction expect the sale to run into several hundred billion yen. Mizuho, Bank of America and Morgan Stanley have been mandated to work on the deal.

The proposed issuance comes as Alphabet accelerates investment in data centres, custom chips, cloud capacity and AI products at a pace that has reshaped expectations for its balance sheet. The company has guided for capital expenditure of $180 billion to $190 billion this year, after spending $91.45 billion in 2025. First-quarter capital spending more than doubled from a year earlier to $35.67 billion, reflecting the cost of meeting demand for computing power across Google Cloud, Gemini, search-linked AI tools and enterprise services.

Alphabet’s move into the yen market follows almost $17 billion raised last week through euro and Canadian dollar bond sales, including a €9 billion issue and a C$8.5 billion transaction. The yen deal would add another currency to its funding programme and widen access to investors looking for highly rated corporate debt with long maturities. For Japan’s bond market, a debut issue from one of the world’s biggest technology companies would offer rare scale and profile at a time when global issuers are seeking pools of capital outside the US.

The timing reflects a broader shift in the technology sector. Alphabet, Amazon, Microsoft and Meta are now expected to spend more than $700 billion on AI infrastructure this year, compared with about $410 billion in 2025. The figures point to a structural change in how Big Tech funds growth. For years, the largest technology companies relied heavily on operating cash flow and large cash reserves. The speed and scale of AI build-outs have pushed them to make more active use of debt markets.

Amazon is also preparing its first Swiss franc bond sale, with a six-part transaction expected to span maturities from three to 25 years. The company has said proceeds will be used for general corporate purposes, which may include business investment and future capital expenditure. Together, the Alphabet and Amazon transactions show how AI spending is becoming a global fixed-income theme rather than a narrow US corporate finance story.

Investor appetite remains supported by the strong credit profiles of the biggest technology issuers. Alphabet continues to generate substantial cash from search, advertising, YouTube, subscriptions and cloud services, while its cloud division has begun to deliver stronger margins after years of heavy investment. Google Cloud’s first-quarter operating income tripled to $6.6 billion from $2.2 billion a year earlier, while Alphabet’s consolidated operating income rose 30 per cent to $39.7 billion. Net income was boosted by gains on equity holdings, including stakes linked to SpaceX and Anthropic.

Google Cloud has also reported a backlog of about $460 billion, nearly doubling quarter on quarter, with just over half expected to convert into revenue over the next 24 months. That backlog gives Alphabet a stronger case for heavy AI-related capital spending, though it also highlights capacity constraints in chips, servers, energy supply and data-centre space.

Alphabet’s custom tensor processing units have become central to that strategy. The company has long used TPUs internally to train and run AI models, including Gemini, and has expanded access through Google Cloud. Management has also indicated that direct TPU sales to selected customers will begin contributing a small amount of revenue by the end of the year, with most of the related revenue expected in 2027.