Alphabet’s 100-year bond gets highest demand in sterling sale

• Alphabet receives £5.75 billion in bids for its rare 100-year £750 million bond
• Alphabet's century bond funds AI investment spree.
• First 100-year bond by a tech firm since the dot-com era

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Alphabet Inc. has received more than seven times orders for the expected £750 million ($1 billion) sale of an ultra rare 100-year bond, a landmark transaction in the debt-fueled race for artificial intelligence supremacy.

The Google parent drew £5.75 billion in bids for the century bond, according to people familiar with the matter, who asked not to be identified. The 100-year note received the most orders among the five sterling tranches that Alphabet is looking to raise on Tuesday, they added.

The 100-year note is part of a broader financing spree for Alphabet, which raised funds in US dollars and is now tapping Swiss francs and the sterling market across different maturities.

The 100-year bond is set to be the first with such an extreme maturity to be sold by a technology firm since the dot-com era. Its inclusion in the firm’s debt-selling spree shows the lengths to which tech giants will have to go in order to raise the huge amounts of money needed to fund their spending on AI capabilities.

It’s a rare feat for a corporate issuer as 100 years is a long time for any business model, balance sheet or company structure to survive. That’s why governments and institutions like universities, some of which have been in existence for hundreds of years, are the main issuers of these securities.

“It’s quite difficult to predict what the AI ecosystem will look like in five years’ time, let along in a hundred years,” said Song Jin Lee, European and US credit strategist at HSBC Bank. “The sector as a whole will be there. But the relative pecking order is quite unpredictable,” he said, acknowledging that there are investors will long-dated liabilities that need to match them with bonds like this.

Things have rapidly evolved since Google Inc. was founded around 28 years ago. Co-founders Larry Page and Sergey Brin officially started the search engine company after getting an investment of $100,000 in 1998. In its early years, the startup worked from a garage in suburban Menlo Park, California, using desktop computers.

Extreme duration has a big impact on bond math. There is a live example of what such a long duration can do to a bond’s price. A 100-year bond issued by Austria in 2120 at a coupon of under 1% — courtesy of the low interest rates of the time — is now indicated at under 30% of face value, based on data compiled by Bloomberg.