Amazon to Raise $12 Billion in First US Bond Sale
Amazon is set to raise approximately $12 billion through a corporate bond sale, marking its first US dollar offering in nearly three years, as leading technology firms increase their expenditures to meet the rapidly growing demands of artificial intelligence (AI), according to reports.
Earlier in the day, the company submitted a regulatory filing for a six-part bond issue, although the total size was not disclosed.
As the adoption of AI accelerates, major tech companies are increasingly resorting to substantial bond sales to fund infrastructure projects that necessitate investments of tens of billions of dollars.
Also Read: AWS Chief Reprimands Employees for Sluggish Product Launches
For the longest segment of Amazon’s offering, a 40-year bond, initial pricing discussions indicate a premium of approximately 1.15 percentage points over US Treasuries.
Other significant companies are also entering the market. Last month, Meta Platforms revealed plans for bond sales totaling up to $30 billion, while Oracle is reportedly preparing to raise $15 billion. The US telecommunications firm Verizon is said to be pursuing $10 billion through bonds to assist in financing its $20 billion acquisition of Frontier.
Morgan Stanley projects that firms such as Meta, Amazon, and Alphabet will invest approximately $400 billion this year in AI-related infrastructure. Amazon alone is anticipated to report capital expenditures of around $125 billion in 2024, with even greater spending expected in the following year.
Amazon may utilize the proceeds from the bonds for acquisitions, capital expenditures, and share repurchases.
The company also recently disclosed a $38 billion agreement with OpenAI, aimed at bolstering its cloud business after losing market share to Microsoft and Google.
Also Read: Federal Reserve Lowers Benchmark Rate by 0.25 Points
This proposed offering comes on the heels of a $27 billion private bond transaction earlier this month, which facilitated the construction of a Meta data center in Louisiana. The project is primarily owned by Blue Owl Capital Inc., with a significant portion of the debt initially acquired by PIMCO.
Meta's recent fundraising efforts occur within a larger trend of increased financing among hyperscalers. According to Morgan Stanley, these firms, which include Meta, Microsoft, and Alphabet, are projected to invest approximately $3 trillion in data centers by 2028. It is anticipated that about half of this amount will be sourced from internal cash flows, while the remainder will be obtained from credit markets.
Meta intends to issue bonds in as many as six tranches, with maturities that span from five to 40 years. The tranche with a 40-year maturity is expected to yield around 1.4 percentage points above the benchmark Treasuries.
Also Read: OpenAI Appoints Mike Liberatore as Business Finance Officer
Chief Executive Officer Mark Zuckerberg and Chief Financial Officer Susan Li informed analysts that Meta's substantial investments in AI are enhancing ad targeting and content recommendations, which are vital to the company's business model.
In the third quarter, Meta reported a 26 percent increase in revenue, reaching $51.2 billion, primarily driven by advertising, which accounts for approximately 98 percent of its total income.