"We'll Pay You Back in 100 Years, We're Not Going Bust"...Big Tech's Confidence Behind the 400 Billion Dollar Debt Bonanza [Weekend Money]

Google's planned "100-year bond" grabs attention
Big Tech investment expected to jump 70% this year
Unclear whether it will bring trickle-down benefits or new risks

News that Google is considering issuing a "100-year bond" has recently drawn attention in many ways. The idea of borrowing money for the next 100 years can be read as an expression of confidence that "we are a company that will last that long." It is rare for a private company, especially a big tech firm at the very center of an innovation whirlwind, to even mention such an ultra-long-term bond.

It is difficult to view this move as a mere one-off episode. This is not just about Google; since the beginning of this year, the size of corporate bond issuance has been rising rapidly across big tech as a whole.

Corporate bonds: Money that companies borrow directly from the market

Corporate bonds are a way for companies to raise funds directly from investors in the bond market instead of taking out bank loans. Investors purchase corporate bonds and receive interest in return, while companies repay the principal at the agreed maturity date. In general, the higher a company's credit rating, the lower the interest rate it can secure and the longer the maturity of the funds it can raise. For this reason, corporate bond issuance conditions are used as an indicator to gauge a company's financial credibility.

Why are big tech companies increasing their debt: AI

Big tech's facility investments generate cascading demand across multiple industries. Among them, semiconductors are regarded as the core.

In a report published on the 10th, iM Securities projected that this year corporate bond issuance by big tech companies, more precisely by hyperscalers (companies operating large-scale data centers required for AI), will increase significantly. Morgan Stanley estimated their annual borrowing volume at around 400 billion dollars (approximately 585 trillion won). This represents a clear increase compared with last year.

The background is clear: AI investment. Park Sanghyun, an analyst at iM Securities, explained, "The expansion of corporate bond issuance by big tech this year is due to a sharp increase in infrastructure investment spending related to AI." Capital expenditures on facilities needed to operate AI, such as data centers, servers, semiconductors, and power infrastructure, are rising across the board. Alphabet, Google's parent company, has signaled capital expenditures of up to 185 billion dollars this year. According to Bloomberg data, total AI-related investment by big tech (hyperscalers) this year is estimated to increase by more than 70% year-on-year.

'100-year bond' message: "We are a company that will last more than 100 years"

In this context, the "100-year bond" mentioned by Google carries strong symbolism. Excluding top-grade sovereign bonds, it is extremely rare for a private company to issue a bond with a 100-year maturity. In fact, since Motorola issued a 100-year bond in 1997, there have been almost no similar cases in the global market.

Park explained, "If a big tech company succeeds in issuing a 100-year corporate bond, it can be interpreted as a signal that the market has, to some extent, acknowledged the long-term growth potential of the AI industry." This means AI is being viewed not as a short-lived fad but as an investment cycle measured in decades.

A surge in corporate bond issuance usually brings credit risk to mind first. An increase in debt means that, in the event of an economic slowdown or poor investment performance, the burden of interest and principal repayment can grow heavier. However, the financial market's response has been relatively calm. Although big tech corporate bond yields and CDS premiums (an insurance-like indicator used to hedge against corporate default risk) have risen temporarily, many assess that the increase remains limited compared with past periods of credit crunch.

The movement of the dollar is interpreted in the same vein. If the market were viewing this as a signal of AI overinvestment or an impending credit crisis, risk-off sentiment would likely have strengthened and the value of the dollar would probably have surged. Park analyzed, "The financial market sees big tech's increased borrowing not as a warning sign, but as funding activity taking place in a growth phase."

Will big tech's debt lead to a chain of investment and trickle-down effects?

The funds raised this time will not remain confined within big tech companies. AI investment generates cascading demand for semiconductors, servers, equipment, and power facilities. The market expects this trend to help sustain the momentum of the U.S. investment cycle and to have a positive impact on the global semiconductor industry, including in Korea and Taiwan. Park assessed, "If AI investments are executed as planned, the trickle-down effect stemming from big tech's AI spending could actually expand further."

However, it is not all optimism. If the returns on AI investments do not materialize as quickly as expected, the gap between companies could widen further. Even among big tech firms, some may rapidly boost productivity, while others may be left shouldering only the cost burden. Over time, there is a strong possibility that a full-fledged "sorting of the winners and losers" based on performance will take place.

The expansion of corporate bond issuance by big tech is certainly an unfamiliar scene. Yet the market still interprets it more as a funding pattern that appears in a growth phase than as an alarm bell. Whether the confidence to take on 100-year debt is justified will depend on how quickly AI investments translate into cash flow. In that sense, what we are seeing now is closer to an observation phase, waiting for the outcome, rather than a conclusion.