E-commerce giant Amazon (AMZN) is the latest Big Tech company with plans to issue a bond offering, joining the likes of Meta (META), Alphabet (GOOGL), and Oracle (ORCL) that have also done so recently. The news did not excite investors, with AMZN stock falling about 2% during the first hour of trading on Monday morning.
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According to Bloomberg, the multinational technology company, which is active across e-commerce, cloud, digital media and entertainment, as well as satellite broadband, has launched a U.S. dollar corporate bond offering.
Amazon Returns to U.S. Bond Market
The sale marked its first such fundraising effort in about three years — the last such U.S. high-grade bond sale took place on December 1, 2022. The new offering may include up to six tranches, the outlet reported, citing an insider source familiar with the matter.
Furthermore, current discussions about pricing suggest the longest of the bonds with a 40-year maturity date is targeted at being priced 1.15% above the U.S. Treasury bond equivalent.
Proceeds generated from raised from the sale would be deployed for general corporate purposes, according to the source. This may include the servicing of debt as well as acquisitions and investments. The sale process is being managed by investment banking titans Goldman Sachs (GS), JPMorgan Chase (JPM), and Morgan Stanley (MS).
Big Tech Pursues AI Growth
The deal comes as Big Tech companies have aggressively ramped up their capital spending on AI infrastructure. These companies, including Microsoft (MSFT), are expected to spend close to $400 billion this year on such infrastructure, including data centers.
Meta Platforms recently raised about $30 billion in corporate bond sales, its largest debt issue so far. This comes even as the American tech giant recently raised $27 billion in private debt in partnership with asset manager Blue Owl Capital (OWL) to fund Hyperion — a project in Louisiana set to be its largest data center to date.
Alphabet also recently joined the trend, raising $7.5 billion in bonds in Europe, with plans to raise another $15 billion in the U.S. by issuing bonds with short to long maturity dates — up to 50 years. Oracle is also said to be looking at adding another $38 billion to its large $104 billion debt to expand its cloud and AI infrastructure, heaping pressure on the software giant’s bond prices.
These trends have led to rising yields for bonds, even as investors have been selling off their bond holdings over concerns about Big Tech’s spending on AI.
Is Amazon a Buy, Hold, or Sell?
Across Wall Street, Amazon’s shares currently have a Strong Buy consensus rating based on 42 Buys issued by analysts over the past three months. Moreover, at $296.64, the average AMZN price target implies over 28% upswing potential from the current trading level.
