Alphabet’s (GOOG), (GOOGL) decision to fund its artificial intelligence capital expenditures with a $100B century bond represents a “huge bet” on a technology that is only three years old, according to Fundstrat economic strategist Hardika Singh.
The offering, which was oversubscribed by 10 times, has drawn comparisons to other century bonds issued by companies that ultimately faced significant challenges or outright failure.
In an interview with CNBC, Singh noted that Alphabet’s (GOOG), (GOOGL) move stands in stark contrast to historical century bond issuers. “Google itself is 28 years old… and Google’s just taking a huge bet on it with this $100B bond offering,” she said, adding that previous century bond offerings were typically done by much older, more established companies she described as “boomers in their age.”
Singh pointed to cautionary tales from corporate history to illustrate the risks involved. JCPenney issued 100-year bonds in the late 1990s only to go bankrupt 23 years later, leaving bondholders with nothing. General Motors (GM) also had a troubled experience with long-duration debt, raising questions about whether such offerings signal a business model at its peak rather than one poised for growth.
The central question, Singh argued, is whether Alphabet (GOOG), (GOOGL) can sustain its dominance over such an extended timeline.
“I think it’s just a matter of, can you, as a company, keep disrupting the space you’re in and reinvent yourself? Because [100 years] is a really long time,” she explained.
Despite these concerns, the remarkable demand for the bond offering suggests investors haven’t given up on big tech. Singh acknowledged that while these companies may have lost their “cult-like status,” the oversubscription demonstrates continued faith in their ability to deliver returns.
The broader market implications are significant, given the outsized portion that large technology companies occupy in major indices.
Singh questioned whether the market could continue pushing toward all-time highs if these major players fail to rally, particularly amid what she described as a “software stumble.”
For long-term bondholders like insurance companies and hedge funds seeking high convexity, the ultimate success of this offering depends entirely on Alphabet’s (GOOGL), (GOOG) ability to remain a disruptor for generations to come.