Alphabet making long-term bet on AI by issuing century bonds

It’s hard enough to predict where this economy is going to be a year from now. But a century from now?

There's no way to know how far AI will have gone in its takeover of human labor, no way to know whether the U.S. dollar will still be the world’s currency of choice, and no way to know whether any of today's giant corporations will still even exist. The biggest corporation a century ago was U.S. Steel, which is now owned by Nippon Steel in Japan.

Regardless, Alphabet, the parent company of Google, could still be making interest payments on some corporate debt a century from now. The company has issued tens of billions of dollars worth of bonds this week in markets worldwide, including some in the United Kingdom with a 100-year maturity date.

The company has plans to spend big on data centers, said Dan Ives, a technology analyst with Wedbush Securities.

“They’re essentially building out new cities,” Ives said. “It’s like building (Las) Vegas from the desert in the 1950s.”

That’s going to take a lot of cash over the course of many years, said Gil Luria, a technology analyst with D.A. Davidson.

“We’re gonna be building out data centers for a long time to come,” he said.

Luria said Alphabet’s sale of century-long bonds is something of a flex on its competitors in the AI race.

“They want to communicate to everybody else ‘we’re in it for the long haul,’” he said. “‘We are gonna drive as fast as we can. I am gonna borrow for a hundred years, because I’m that confident I’m gonna win.’ That’s what Google is doing.”

Some buyers are interested in bonds that won’t mature until 2126.

Gerald Cohen, an economist at the University of North Carolina, said some money managers think very far ahead.

“Insurance companies, pension companies have very long-dated liabilities,” he said.

Alphabet had no problem finding buyers for its century bonds, according to Bloomberg. But Cohen says it’s hard to say how this will all work out, for Alphabet or for bond investors. The last tech company to issue a 100-year bond was cell phone maker Motorola. That was in 1997 — before the iPhone.

“The company still exists, although it doesn’t exist in the same format as it did almost 30 years ago,” Cohen said.

Those Motorola bonds are now trading on the secondary market for around 80 cents on the dollar.