Alphabet’s century bond loses 7% as hyperscaler debt fears grow

Alphabet's ↗ 0.24% landmark 100-year sterling bond has lost more than 7% of its face value since its issuance in February, as a combination of geopolitical turmoil, rising yields, and growing doubts about Big Tech's debt-fueled AI spending weigh on the instrument.City AM

The £1 billion bond, which carries a coupon of 6.125% and matures in 2126, was the first century bond issued by a technology company since Motorola ↗ 2.66% in the late 1990s. It was nearly 10 times oversubscribed at auction, a sign of investor enthusiasm that has since faded sharply.Reuters+2

Macro Headwinds and the Iran Conflict

City AM reported on Tuesday that the bond's decline has been driven by twin forces: the onset of the Iran war in late February, which prompted investors to reassess long-term inflation expectations, and a broader slowdown in the Magnificent 7 technology stocks.City AM

Yields on long-dated debt across developed economies have climbed since the conflict began, with UK gilts under particular stress due to Britain's reliance on imported energy. "The decline isn't entirely surprising — a 100-year bond carries extreme sensitivity to interest rate moves," said Lana Vaselova, a manager at Cbonds, "which is precisely what made it attractive when rates looked set to fall."City AM

Hyperscaler Debt Fears Intensify

The bond's slide comes against a backdrop of mounting investor anxiety over hyperscaler borrowing. Since the start of 2025, Alphabet, Meta ↘ 1.80%, Amazon Amazon.com, Inc. ↘ 0.66%, and Oracle ↘ 4.21% alone have issued more than $300 billion in bonds, according to Bloomberg calculations cited by Fortune. Coverage ratios for hyperscaler bond issuance have tumbled from 5x in February to below 2x in July, signaling waning demand even as supply accelerates.Fortune

Bloomberg reported last week that hyperscaler bonds have become a drag on investor portfolios globally, underperforming on "almost every metric."Bloomberg

Record Quarter, Record Spending

The pressure on Alphabet's debt comes even as the company delivered a record second quarter. Results released on Tuesday showed revenue of $119.8 billion, up 24% year-over-year, with Google Cloud revenue surging 82%. But Alphabet also raised its full-year 2026 capital expenditure guidance to between $195 billion and $205 billion, up from $180 billion to $190 billion just three months earlier.Asianet Newsable+3

The accelerating spend underscores the tension at the heart of the bond's decline: investors who were once eager to fund Big Tech's AI ambitions are now questioning whether the returns will justify the borrowing.