Amazon Secures $15 Billion in Robust Bond Offering
(Bloomberg) — Amazon.com Inc. has successfully raised $15 billion through its inaugural US dollar bond offering in three years. This move is part of a broader trend among technology companies engaging in substantial debt sales, all aimed at financing infrastructure for artificial intelligence.
The proceeds from this transaction—exceeding initial projections by $3 billion—are earmarked for various purposes, including acquisitions, capital investments, and share repurchase initiatives, as disclosed by sources familiar with the details.
In terms of demand, the bond issuance peaked at approximately $80 billion before the final orders were significantly reduced, attributed to a decline in borrowing costs during the sale process.
Individuals familiar with the situation, who requested anonymity, provided these insights. WATCH: Amazon is poised to raise $15 billion through its first US dollar bond offering in three years to support AI infrastructure and other ventures.
This sale follows closely after Alphabet Inc., Google’s parent company, capitalized on $25 billion in debt across US and European markets earlier this month.
Additionally, Meta Platforms Inc. conducted a $30 billion corporate bond issuance last month, marking the largest offering of the year, while Oracle Corp. secured $18 billion through high-grade notes in September.
The surge in issuance from the technology sector has propelled global figures to unprecedented heights, surpassing $6 trillion this year.
Analysts at JPMorgan Chase & Co. anticipate that ongoing investment in artificial intelligence will further accelerate issuance in the US high-grade market, potentially reaching a staggering $1.81 trillion in the coming year.
Amazon’s bond issuance comprised investment-grade notes issued in six segments, with the pricing for the most extended duration—a 40-year bond—tightening from an initial 1.15 percentage points above Treasuries to 0.85 percentage points.
Goldman Sachs Group Inc., JPMorgan Chase, and Morgan Stanley, the institutions orchestrating the bond sale, opted not to provide comments.
In an email response to inquiries, Amazon indicated that these funds will “support business investments, facilitate future capital expenditures, and settle impending debt maturities.”
As the preeminent provider of rented computing resources—crucial for powering artificial intelligence systems—Amazon has been robustly investing in data centers and chips to develop and operate AI models capable of producing text, images, and automating various processes.
Projected capital expenditures for Amazon are expected to exceed $147 billion next year, roughly threefold the figures observed in 2023, according to a compilation of analyst estimates by Bloomberg.
JPMorgan analysts noted that this moment presents a favorable opportunity for Amazon, which has predominantly relied on its cash flow for investments, to integrate debt into its capital framework, enhancing its funding flexibility.
Moreover, there is speculation that Amazon may explore private credit markets to devise financing solutions related to its extensive data center operations, possibly employing sale-leaseback or joint-venture structures, as noted by JPMorgan.
Since 2022, Amazon’s data center power capacity has doubled, with CEO Andy Jassy projecting another doubling by 2027.
Earlier this month, the company’s cloud division entered into a staggering $38 billion agreement to provide OpenAI with access to numerous Nvidia Corp. graphics processing units as part of a seven-year computing deal.
The last foray Amazon made into the US high-grade market occurred in November 2022, when it raised $8.25 billion.
Source link: Finance.yahoo.com.
