Amazon plans $42b bond sale to fund AI

Amazon is marketing a cross-Atlantic bond offering aimed at raising the equivalent of about US$37 billion to US$42 billion in dollars and euros to help fund its AI-related investments, people with knowledge said.

The company seeks US$25 billion to US$30 billion in US-dollar high-grade notes across as many as 11 tranches spanning two to 50 years, people with knowledge said.

It also plans a debut euro sale of up to €10 billion (US$11.6 billion) in as many as eight tranches maturing in two to 38 years.

Initial price talk for the longest dollar tranche due 2076 implied a yield about 1.55 percentage points above Treasuries, people with knowledge said.

Goldman Sachs, JPMorgan Chase, Citigroup, and HSBC are among the banks managing the deals.

🔗 Source: Bloomberg

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Implications, context, and why it matters.

Wall Street’s split verdict on Amazon’s $200 billion AI bet

Amazon plans about $200 billion in capital expenditures (money spent on long-term assets like data centers and servers) for 2026, which helped drive an 11% after-hours stock drop after the guidance talk 1.
Stock investors worry the AI infrastructure spend may not pay off, since it may push free cash flow (cash left after operating costs and capital spending) into negative territory 2.
Bond buyers moved the other way, placing about $126 billion of orders for the US-dollar portion of Amazon’s debt sale 3.
Amazon raised $37 billion from a US-dollar bond sale and said a euro sale could lift the total to nearly $50 billion, according to Bloomberg 3.

The AI arms race creates a hidden tax on profits

The AI build-out also brings accelerated depreciation (recognizing equipment wear-and-tear faster for accounting purposes), which cuts reported profits 4.
Amazon shortened the estimated useful life for some servers and networking equipment to five years from six, effective Jan. 1, 2025 4.
Amazon expects operating income to fall about $1.3 billion in 2025, about $0.7 billion from the shorter life estimate plus about $0.6 billion from depreciation tied to early retirements 4.
Costly hardware can age faster than expected, which can weigh on earnings over time beyond the upfront spending totals 4.