First corporate bond issuance since 2017

Over $115 billion in orders — four times the offering size

Top AAA credit rating secures favorable borrowing terms

Big Tech bond issuance tops W420 trillion this year

The Microsoft logo. [Getty Images]
The Microsoft logo. [Getty Images]

As competition among global technology giants over AI investment intensifies, Microsoft — long cautious about taking on debt — has returned to the corporate bond market for the first time in nine years. With the cost of building AI data centers surging, even cash-rich Big Tech companies are increasingly turning to external financing.

According to Bloomberg, Microsoft launched a sale of at least $25 billion in dollar-denominated corporate bonds on Thursday (local time). It was the company's first foray into the US bond market since 2017.

While rivals including Alphabet, Meta and Oracle had already tapped bond markets to fund their AI ambitions, Microsoft had remained relatively restrained about borrowing. The move signals that the rapid expansion of AI infrastructure spending has finally pushed Microsoft to seek outside capital as well.

The offering is structured across 10 tranches with maturities ranging from two to 40 years. The spread on the longest-dated tranche, due in 2066, was set at 1.05 percentage points above US government bonds.

That is tighter than the 1.3 to 1.4 percentage-point spreads on 40-year bonds issued by Alphabet, Meta and Oracle — a reflection of Microsoft's AAA credit rating, the highest among global Big Tech companies, which analysts say translated directly into more favorable borrowing conditions.

Investor demand was strong. The offering drew more than $115 billion in orders, more than four times the planned issuance size.

Wells Fargo, JPMorgan Chase and UBS Group served as lead underwriters. Microsoft said it plans to use the proceeds for capital expenditures and general corporate purposes.

Microsoft also moved to ease investor concerns about the financial strain of its AI spending when it reported first-quarter earnings for fiscal year 2027 (July–September) on Thursday. Despite higher capital expenditure, the company maintained positive free cash flow, offering some reassurance to shareholders.

The surge in Big Tech bond issuance is being driven by rising costs to build AI data centers. As expenses mount — partly due to semiconductor supply shortages — companies are increasingly looking to bond markets to secure the large-scale funding their investment plans require.

Investment-grade bond issuance by hyperscalers — companies that operate large-scale data centers — has exceeded $313 billion this year, nearly triple the total for all of last year.

However, market views on the financial risks of Big Tech's growing debt loads are divided. As the race to invest in AI heats up, differences in corporate credit risk indicators have become more pronounced.

The five-year credit default swap spread — a measure of the cost to insure against a bond default — stands at 116 basis points for Meta and 275 basis points for Oracle. A higher CDS spread signals greater perceived credit risk.

Microsoft's five-year CDS spread, by contrast, sits at a relatively stable 54 basis points. Even as Microsoft enters the bond market for the first time in nine years to fund its AI expansion, its top credit rating and solid financial footing are allowing it to raise large sums at a lower cost than its peers.


sjy@heraldcorp.com