Big Tech borrowed $50bn for AI in six days, and lenders are charging more

AI debt is getting dearer, and the biggest borrowers are taking more of it anyway. In the six days from 29 October, Microsoft, Oracle and Meta sold $50bn of dollar bonds, and Alphabet added €6bn in euros. The companies’ own filings show the price going up. Oracle’s seven-year notes priced at 305bp over Treasuries on 2 November, against 130bp for notes of the same maturity in February. Meta paid 160bp on its ten-year notes on 3 November, up from 90bp in April.

The rest of the bond market moved much less. The extra yield on the ICE BofA index of US investment-grade bonds rose from 74bp to 94bp between 2 February and 2 November. Lenders are pricing the AI borrowers apart from everyone else, and the more a company borrows against the build-out, the more it pays.

Rise in the spread over government bonds on new notes of the same maturity, from the company's earlier sale this year to now, basis points. Source: Company pricing term sheets filed with the SEC (Oracle 2033 notes, 2 February and 2 November; Meta 2036 notes, 30 April and 3 November; Alphabet 2032 euro notes over German Bunds, 5 May and 2 November); ICE Data Indices via FRED (BBB from 2 February, AA from 30 April, both to 2 November).

Oracle 2033 notes	175
Meta 2036 notes	70
Alphabet 2032 euro notes	45
US BBB index	24
US AA index	19

Source: Company pricing term sheets filed with the SEC (Oracle 2033 notes, 2 February and 2 November; Meta 2036 notes, 30 April and 3 November; Alphabet 2032 euro notes over German Bunds, 5 May and 2 November); ICE Data Indices via FRED (BBB from 2 February, AA from 30 April, both to 2 November).The Macro Notebook

Four AI bond sales in six days

The sales came one after another, each filed with the Securities and Exchange Commission:

• Microsoft, 29 October. $25bn in ten parts, rated AAA. Its ten-year notes paid 65bp over Treasuries, a yield of 5.595%, its term sheet shows.
• Oracle, 2 November. $10bn of notes in five parts, at yields from 7.062% to 8.667%, according to its term sheet. Moody’s rates the notes Baa2 with a negative outlook and S&P BBB-, the lowest investment grade.
• Alphabet, 2 November. €6bn in seven parts. Its 2032 notes paid 112bp over German Bunds, the filing shows, against 66.6bp on 2032 notes in its €9bn sale in May.
• Meta, 3 November. $15bn in five parts, rated Aa3. Its ten-year notes paid 160bp, a yield of 6.552%, its term sheet shows. In April the same maturity paid 90bp and yielded 5.286%.

Microsoft is the exception. Its ten-year spread of 65bp matched the 65bp on the ICE BofA AA index that day, though Microsoft is rated a grade higher. It borrowed at the market’s price, with no premium for the build-out.

Oracle used its whole funding cap in five days

On 28 October, at its investor day, Oracle committed to limit the new money it raises in the capital markets through fiscal 2030 to $20bn, split between $10bn of equity and $10bn of debt, its press release says. It expects positive free cash flow in the second half of fiscal 2028 and growth that pays for itself from fiscal 2029.

Five days later it launched both halves: $10bn of common stock and the $10bn of notes. The cost has risen fast. In February Oracle’s 2033 notes yielded 5.354%, that sale’s term sheet shows; the new 2033 notes yield 7.851%. Of that rise of 2.5 points, about 0.75 came from higher Treasury yields. The other 1.75 points, seven-tenths of the rise, is Oracle’s own premium. Over the same months the spread on the ICE BofA BBB index, where Oracle’s grade sits, rose by 24bp.

Insurance against default tells the same story. Oracle’s credit default swaps cost 294.4bp last week, up from below 100bp a year ago, Axios reported, citing S&P Capital IQ. Alphabet’s cost 91.6bp, nearly three times their level of a year earlier.

Cheaper money for almost everyone else

For most borrowers, October made money cheaper. The ten-year Treasury yield fell from 5.29% on 30 September to 4.94% on 30 October, Treasury figures show, while the investment-grade index spread rose by only 10bp. On those two figures, a high-grade company’s cost of ten-year money fell by about a quarter of a point.

The pain sits lower down. Convertible bonds, a common way for smaller AI firms to borrow, lost 6.4% in October, their worst October since 2008, according to a Barclays note quoted by Axios. Its strategists called highly leveraged “neocloud and data-center issuers particularly vulnerable”. QTS, an investment-grade data centre operator backed by Blackstone, weighed a deal to borrow $800m at 170bp over Treasuries six months ago. The same debt is now being offered at 220bp to 250bp, Semafor reported.

This is the same build-out whose bonds made up more than half of net supply in the US investment-grade market this year, as we reported on 11 October. Demand for those bonds has been strong: private foreign buyers have come to prefer US corporate bonds to Treasuries, as we wrote on 15 October. The price of that money is now going up for the companies that need the most of it.

What to watch next

Oracle’s notes settle on 4 November. The US jobs report on 6 November and consumer prices on 10 November will move Treasury yields, the other half of what these companies pay. The Fed decides on rates on 9 December. The test for the AI borrowers is whether their spreads keep widening when Treasury yields fall, as they did in October.