From Europe to Japan and Switzerland, massive bond issuances by technology giants indicate that these smaller markets, often overshadowed by the U.S., can also perform strongly within the $40 trillion corporate bond market.
Data from London Stock Exchange Group (LSEG) shows that Alphabet, the parent company of Google, is now one of the largest issuers of outstanding debt in the pound sterling and Swiss franc corporate bond markets.
Meanwhile, Amazon raised €14.5 billion (approximately $16.88 billion) through an eight-part transaction in March, setting a record for the largest single issuance ever in the euro corporate bond market.
Bankers state that these so-called "hyperscale tech firms" issuing bonds outside the United States represent early steps in their push to diversify financing channels.
They plan to fund trillions of dollars in investments for artificial intelligence (AI) infrastructure, particularly data centers, over the coming years.
By raising funds in foreign currencies, these companies can hedge against currency risks associated with their global assets while also taking advantage of relatively lower borrowing costs in regions like Europe.
Alphabet has set records in multiple markets, with its yen, Canadian dollar, Swiss franc, and pound sterling bond issuances each breaking financing records for their respective currencies.
In Europe, the activities of Alphabet and Amazon have pushed the total financing volume for U.S. non-financial corporations this year past €60 billion (approximately $69.85 billion), reaching another record high.
A Wave of Record-Breaking Debt Issuance
Morgan Stanley estimates that total euro-denominated bond issuance by hyperscale tech firms could reach around €50 billion this year, potentially propelling the United States past France to become the largest source of corporate bonds in the eurozone.
Many markets, including the euro market, have gradually matured and now offer greater market depth and more opportunities for large-scale financing than ever before, according to John Servidea, Global Co-Head of Investment Grade Finance at JPMorgan, which recently led deals for both of these hyperscale tech companies.
As these transactions proceed, the volume of international bond issuance by non-financial corporations tracked by LSEG has surged significantly this year in markets like the Swiss franc and Japanese yen.
Servidea noted that beyond hyperscale tech firms, other U.S. companies are also recognizing the potential to raise substantial capital in these markets.
More broadly, borrowing volumes in currencies such as the Australian dollar and Hong Kong dollar have also grown substantially as international corporations diversify their financing sources.
Concurrently, given geopolitical tensions and policy uncertainties, investors have shifted their focus towards diversifying their allocations beyond the U.S. dollar.
Funding the AI Investment Surge
According to Bank of America, non-U.S. dollar bond issuance by hyperscale tech firms has doubled this year, accounting for 30% of their total bond financing.
JPMorgan's Servidea explained that fundraising overseas allows tech giants to extend the intervals between their U.S. market financing rounds while securing borrowing rates that are, in some cases, lower than or at least on par with those in the dollar market.
Heavy borrowing could weigh on the performance of the issuers' bonds, and analysts have already observed signs that bonds from hyperscale tech firms are underperforming the broader U.S. corporate bond market.
Reducing the frequency of entries into the U.S. market may help mitigate this impact.
Meanwhile, investors are eager to gain exposure to the AI theme within international bond markets.
As the scale of technology-related bond issuance expands, corporate bond markets outside the U.S. will become more susceptible to the dynamics of the tech sector, regardless of the overall market environment.
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