• Big Tech bond offerings from Europe to Japan and Switzerland show smaller markets, traditionally dwarfed by the U.S., can flex their muscles in the $40 trillion corporate debt sector.

Google-parent Alphabet (GOOGL.O) is already one of the largest outstanding borrowers in the sterling and Swiss franc corporate bond markets, while Amazon (AMZN.O) raised 14.5 billion euros ($16.88 billion) in March from an eight-part deal, the biggest ever in the euro corporate bond market, LSEG said.

The debt issuance by so-called “hyperscalers”, or Big Tech, outside the United States is part of a campaign to diversify funding early as they plan to finance trillions of dollars of investment in AI infrastructure, mainly data centres, in the years ahead, bankers say.

Companies can also hedge their currency risk on global assets by issuing debt in foreign currencies, benefiting from relatively cheaper borrowing costs in regions like Europe.

Alphabet broke records across markets, with its yen, Canadian dollar, Swiss franc and sterling deals all breaking borrowing marks in respective currencies.”If you fast forward 12 months looking at the pace of investment of these companies, some of these companies are going to be already among the biggest issuers globally in any currency,” said Giulio Baratta, co-head of investment-grade finance at BNP Paribas.

Meanwhile, Alphabet and Amazon have helped increase borrowing by non-financial U.S. corporations in Europe to above 60 billion euros ($69.85 billion) this year, another record.

DEBT SALES RECORD

Morgan Stanley forecasts euro debt issuance from the hyperscalers to hit roughly 50 billion euros in borrowing this year, a move that could help the U.S. edge past France as the largest provider of overall corporate debt in the euro zone.”A lot of these markets, including euro, have evolved and now provide a lot more depth and opportunity for larger capital raising than was historically the case,” said John Servidea, global co-head of investment grade finance at JPMorgan, which guided recent offers for the two hyperscalers.

Hyperscalers sold a record amount of international non-financial corporate bonds this year in markets such as the Swiss franc and yen, LSEG tracked.

The capacity for U.S. companies beyond the hyperscalers to raise considerable amounts of money in such markets has not gone overlooked, Servidea added.“They’re definitely looking at other markets more seriously than they would have done before.”

On a broader basis, currencies such as the Australian dollar and Hong Kong dollar have also seen an increase in borrowing as global corporations diversify their funding sources.

Meanwhile, amid international tensions and policy uncertainty, investors are turning to diversification away from the U.S. currency.

BUILDING UP EXPOSURE TO AI

Hyperscalers’ non-dollar issuance has doubled to 30% of their total bond funding this year, Bank of America said.

“It means that Big Tech can go longer periods between taps of the U.S. market and borrow at rates that are in some cases cheaper than the U.S. dollar market, or at least similar,” Servidea said in an email.

Heavy borrowing can weigh heavily on a borrower’s bonds, and experts see indicators of hyperscalers underperforming the U.S. corporate bond market. If you visit it less often, that can assist to lessen the hit.

BNP Paribas, which also arranged ​deals for Alphabet and Amazon, said the companies were mainly holding the cash in the currency they are raising rather than converting ​them back to dollars.

As for investors, they are seeking to gain exposure to the AI theme in the international bond markets where technology brands had a limited presence before.

Nicolas Forest, chief investment officer at Candriam, is one example who is buying into the euro offers from hyperscalers to increase exposure to the IT industry in the European bond market.

By the end of April, one round of issuance had seen Alphabet replace the UK’s Prudential as the fourth-largest borrower in ⁠ICE BofA’s pound corporate bond index and the sixth-largest in Swiss francs.

As tech issuance increases, corporate bond markets outside the U.S. will be more exposed to tech trends, for better or worse.“If there are problems with (AI), it will probably create more volatility,” said David Zahn, head of European fixed income at Franklin Templeton.