Microsoft Returns to the Bond Market and Aims to Raise $25 Billion for AI — Bloomberg

Microsoft plans to raise at least $25 billion in the U.S. debt market, according to sources cited by Bloomberg. This will be the company’s first investment-grade bond offering in more than nine years. The proceeds will be used, in part, for capital expenditures, one of the agency’s sources said. The deal will test the market’s willingness to finance AI development amid growing doubts about the sustainability and justification of the industry’s massive spending, Bloomberg notes.

The final size of the offering has not yet been determined and may change depending on investor demand, sources said. According to them, the company is offering the bonds in ten tranches with maturities ranging from two to 40 years. For the “longest-dated” bonds, maturing in 2066, the initial yield guidance implies a premium of up to 1.35 percentage points over the yield on U.S. Treasury bonds, one of the sources said.

Wells Fargo, JPMorgan Chase, and UBS Group are acting as underwriters for the offering. The banks, like Microsoft, either declined to comment or did not respond promptly to the agency's inquiries.

The world's largest software developer remains one of only two publicly traded U.S. companies with the highest AAA credit rating from Moody's Ratings and S&P Global Ratings—along with Johnson & Johnson. However, Microsoft last raised funds in the high-grade debt market in 2017, when it issued $17 billion in debt, according to Bloomberg.

Microsoft is returning to the debt market amid massive investments in AI infrastructure. As the tech giant reported yesterday, its capital expenditures reached $45.2 billion last quarter, though they fell short of the company’s own forecast of $50 billion. Top management attributed the shortfall to delays in project implementation, rather than a revision of spending plans, according to Reuters. At the same time, Microsoft lowered its full-year capital expenditure forecast from $175 billion to $170 billion.

Microsoft is joining the wave of tech companies raising capital to fuel a new round of funding for artificial intelligence development. So far this year, there have been nine investment-grade bond offerings in the U.S., each totaling $25 billion—a record number in history, Bloomberg reported in early October. The majority of these offerings came from the technology sector.

Companies financing the construction of AI infrastructure, including Oracle, Broadcom, and SpaceX, had raised approximately $500 billion in new debt by that point, according to the agency's data. Specifically, in April, Meta issued $25 billion in bonds, and in August, Alphabet issued bonds for the same amount.

The rapid pace and massive scale of borrowing, combined with uncertainty surrounding the technology and rising interest rates, have intensified pressure on the sector. In recent months, the cost of credit default swaps—instruments that insure against debt default—has risen. This indicates that market participants view the risk of default by major cloud providers and chip manufacturers over the next five years as increasingly high.

“Every new announcement of a funding round is seen as yet another player entering the fray for investors’ money. This is leading to a level of credit spread volatility that would have been hard to imagine just a year ago,” Mark Clegg, senior fixed-income trader at Allspring Global Investments, told the agency. “Sometimes it seems as though the market is convening an emergency meeting every few hours to reassess the scale of AI infrastructure development.”

This article was AI-translated and verified by a human editor