For the first time in three years, Amazon.com, Inc. (AMZN.US) is issuing bonds! $15 billion will be used to "transfuse" AI. Next year's capital expenditures may reach $147 billion.

Amazon.com, Inc. (AMZN.US) recently launched its first US dollar bond issuance in three years, raising $15 billion. Currently, tech companies are competing to finance artificial intelligence (AI) infrastructure, sparking a wave of large bond issuances. This move by Amazon.com, Inc. further joins this trend. According to sources familiar with the matter, the fundraising size of this issuance exceeded the initial expectations by $3 billion, and the funds will be used for acquisitions, capital expenditures, stock buybacks, and other purposes. Sources stated that during the bond issuance, there was about $80 billion in subscription demand, but as the cost of financing decreased, the final order size was reduced by nearly half. Sources mentioned that Amazon.com, Inc.'s investment-grade bonds were divided into six parts. The pricing spread for the 40-year bonds was eventually set at 0.85 percentage points above US Treasury yields, narrowing by 0.3 percentage points from the initial offer. Goldman Sachs Group, Inc., JPMorgan, and Morgan Stanley were jointly responsible for this bond issuance, and all three institutions did not comment on the transaction details. In response to inquiries, Amazon.com, Inc. stated in an email that the fundraising will "support business investments, provide funds for future capital expenditures, and repay upcoming debt." As the world's largest cloud computing service provider, Amazon.com, Inc. is continuously increasing investments in data centers and chip technology to build AI models that can generate text, images, and automate processes. Based on analysts' average expectations, Amazon.com, Inc.'s capital expenditures next year are expected to surpass $147 billion, about three times the level of 2023. JPMorgan stated in a report last week that Amazon.com, Inc. previously relied mainly on internal cash flows to fund investments, and it is now an appropriate time for them to incorporate bonds into their capital structure to enhance financing flexibility. JPMorgan also added that "Amazon.com, Inc. may also leverage the private credit market to design financing solutions for its vast data center asset portfolio," mentioning potential paths such as sale-leaseback or joint venture models. Since 2022, the power capacity of Amazon.com, Inc.'s data centers has doubled. The CEO, Andy Jassy, stated that they expect this number to double again by 2027. Earlier this month, Amazon.com, Inc.'s cloud services division signed a seven-year cloud computing agreement worth $38 billion with OpenAI, providing the latter with hundreds of thousands of NVIDIA Corporation's graphics processors. The last time Amazon.com, Inc. entered the US high-grade bond market was in November 2022 when they raised $8.25 billion. Concerns about massive AI expenses In this current wave of tech companies issuing bonds, Alphabet Inc. Class C (GOOGL.US) issued $25 billion in bonds earlier this month in the European and American markets; Meta (META.US) issued $30 billion in corporate bonds last month, setting a record for the largest issuance of the year; Oracle Corporation (ORCL.US) also raised $18 billion through high-grade bonds in September. This wave of bond issuances has pushed the global bond issuance volume to exceed $6 trillion, reaching a historic high. JPMorgan estimates that the new wave of spending to fund AI investments will push the US high-grade bond market issuance volume to a record $1.81 trillion next year. However, analysts warn that this may "flood" the bond market and accumulate new risks for credit investors. At the same time, with increased concerns in the market about excessive corporate AI spending, investors are generally adopting a cautious attitude. Oracle Corporation is a typical negative example of this. As many start to question whether the AI market is developing too quickly and experiencing a bubble, investors are raising doubts about the company's ambitious goals announced on Investor Day. Oracle Corporation stated that they expect their cloud infrastructure revenue to increase from $18 billion in fiscal year 2026 to $166 billion by fiscal year 2030. As of mid-November, Oracle Corporation's stock price was experiencing its worst single-month performance since 2011. According to credit analysts, as more investors seek to hedge risks, Oracle Corporation's five-year credit default swap (CDS) briefly rose to a two-year high, although not reaching dangerous levels, it is worth keeping a close eye on. Bank of America Corp strategist Michael Hartnett mentioned in a recent report that investors should consider shorting the bonds of mega-cap tech companies. The strategist stated that for mega-cap tech companies like Amazon.com, Inc., Alphabet Inc. Class C, Meta, Microsoft Corporation (MSFT.US), and Oracle Corporation, their cash flows are no longer sufficient to support the current "AI capital spending arms race." PGIM Global Bonds Manager Robert Tipp stated, "The sudden increase in supply is putting some pressure on the market. These AI bond issuances are coming on strong. Although they may trade with narrower spreads, they are likely to reshape the entire market." He explained that the surge in bond issuances could push up yields on longer-term bonds.