Artificial intelligence is undoubtedly a capital-intensive industry, requiring substantial financial investment in both computing resources and top-tier talent. The main participants are now using unprecedented financial means to fund this endless AI arms race. Alphabet, the parent company of Google, plans to issue ten bonds with maturities ranging from 2 to 40 years, raising $20 billion to $25 billion, equivalent to approximately 135.3 to 169.1 billion Chinese yuan. The longest 40-year bond has an interest rate 1.3 percentage points higher than that of U.S. Treasury bonds. This large-scale financing will support Google's continued investment in AI, including data center expansion, TPU development, and model training.
At the same time, SoftBank Group is also significantly increasing its leverage. According to the FY2026Q1 financial report of SoftBank, its Vision Fund 2 subsidiary signed a two-year $10 billion secured loan agreement with a syndicate of Goldman Sachs, JPMorgan, Mizuho, Apollo, and Sumitomo Mitsui on the 5th of this month, equivalent to approximately 67.6 billion Chinese yuan. The collateral for this loan is SoftBank's shares in OpenAI, and the funds will be used for general corporate purposes by SoftBank Group and Vision Fund 2. By using OpenAI shares as collateral rather than selling them directly, SoftBank retains the potential for future value appreciation while gaining immediate liquidity, demonstrating confidence in the long-term value of OpenAI.
Debt Financing Becomes a Common Choice for AI Giants
Both companies have chosen debt financing over equity financing, reflecting the particularity of current AI investments. AI infrastructure investments are characterized by high capital expenditures and long return cycles. Data center construction and chip procurement require significant initial investment, while commercialization often takes years before showing significant returns. Issuing long-term bonds allows companies to lock in lower financing costs and avoid diluting equity or reducing investment scale during critical periods of AI competition. The design of Alphabet's longest 40-year bond spreads repayment pressure over an extended period, leaving ample space for sustained high-level AI investment.
SoftBank's borrowing secured by OpenAI shares represents a new financing model. As OpenAI's valuation continues to rise, its equity has become a highly liquid and valuable collateral asset, allowing investors to unlock part of its value without waiting for an IPO. However, this approach also carries risks: if OpenAI's valuation declines, SoftBank may face the pressure of adding more collateral or being forced to liquidate. The scale and leverage level of financing in the current AI sector have far exceeded those of any previous technology cycle. The giants are betting that AI will generate returns sufficient to cover these debts within the next decade, but the success of this bet remains to be seen.
