Alphabet's Century Bond Plan Amid AI Capex Surge

What happened

Alphabet reportedly plans to issue 100-year bonds, following a recent 50-year offering, extending its borrowing horizon beyond even the U.S. government. This move aligns with the company's aggressive AI infrastructure buildout, as detailed in filings guiding 2026 capex to $175B–$185B for data centers and servers. Despite strong operating cash flow, the bond issuance suggests management is locking in long-term debt to fund multi-year commitments, including $52.7B in future lease payments. However, the DeepValue report cautions that Alphabet's valuation hinges on converting $242.8B in Cloud backlog into revenue before this capex compresses free cash flow. Critics may view the century bond as overconfidence, given ongoing capacity tightness and rising AI costs that could delay ROI.

Implication

The 100-year bond provides low-cost capital to support Alphabet's massive capex ramp without straining near-term liquidity, potentially easing cash flow pressures during the AI buildout. It signals management's belief in sustained Cloud demand, backed by a $240B+ backlog that offers revenue visibility. However, this long-term debt adds to fixed obligations, increasing financial leverage and raising the stakes for timely revenue recognition from Cloud contracts. Investors must now track whether capacity tightness eases and Cloud growth accelerates to justify the elevated spend, as failure could lead to margin erosion despite the debt funding. Ultimately, the bond does not change the core investment thesis but underscores the need for vigilant monitoring of capex ROI and Search monetization durability.

Thesis delta

The 100-year bond issuance does not shift the fundamental thesis that Alphabet must prove Cloud ROI and Search resilience amidst high capex. It introduces a new debt-management element, but the key drivers—converting backlog into revenue and managing AI costs—remain unchanged, reinforcing the 'WAIT' rating until clearer evidence emerges in the next 3-6 months.