As Alphabet returns to the debt market to fund its artificial intelligence buildout, the company is acknowledging new risks tied to the rise of AI and its hefty investments in infrastructure.
In its annual financial report late last week, the Google parent highlighted the potential impact of AI on the company's core advertising business and the possibility of ending up with "excess capacity" from its costly commitments.
"To meet the compute capacity demands of AI training and inference, as well as traditional cloud computing services, we are entering into significant leasing arrangements with third party operators, which may increase costs and operational complexity," the company stated in the filing with the SEC. Large commercial agreements could also increase "liabilities and obligations in the event of nonperformance by us, our counterparties, or vendors," Alphabet said.
One of the headline numbers in Alphabet's earnings report was $185 billion, representing the high end of what the company says it may shell out in capital expenditures this year, more than double its 2025 capex.
To help finance its AI ambitions, Alphabet is planning to raise $20 billion from a U.S. dollar bond sale, according people familiar with the matter who asked not to be named because the details are confidential. The planned sale would take place over four tranches, including a 100-year bond deal in sterling, the people said, with one adding that the deal is five times oversubscribed.
Bloomberg first reported on the planned debt funding, which was originally expected to reach $15 billion.
Alphabet held a $25 billion bond sale in November. Its long-term debt quadrupled in 2025 to $46.5 billion. CFO Anat Ashkenazi said on last week's earnings call that as the company considers its total investment, "we want to make sure we do it in a fiscally responsible way, and that we invest appropriately, but we do it in a way that maintains a very healthy financial position for the organization."
When asked on the call what keeps executives up at night, CEO Sundar Pichai responded "compute capacity," adding, "power, land, supply chain constraints, how do you ramp up to meet this extraordinary demand for this moment?"