Microsoft Corp. intends to raise at least $25 billion through its first investment bond issuance in the US in nearly a decade. This move tests investor readiness for artificial intelligence-related debt instruments amid rising borrowing costs and spending concerns.
According to sources familiar with the matter, the world's largest software developer is offering debt in up to 10 tranches with maturities ranging from two to 40 years. The final size of the offering has not yet been determined and may change depending on demand.
This issuance will be an important test of demand for financing AI investments, as concerns grow over excessive spending and the time required to generate returns from this technology. Investors who initially showed great interest in this debt have sometimes backed away, demanding higher compensation. Furthermore, the rise in base interest rates has increased the cost of borrowing.
Despite the more cautious backdrop, Microsoft is expected to find willing buyers. The company stands out among its Big Tech peers for not having approached the market for many years; it last sold high-quality debt in 2017, raising $17 billion. Microsoft is also the only publicly traded American firm, besides Johnson & Johnson, that holds top AAA ratings from Moody's Ratings and S&P Global Ratings.
Brett Kozlowski, portfolio manager at GW&K Investment Management, noted that 'the timing of this deal seems opportunistic, as we don't see a real need for the issuance, but demand should be strong given the uniqueness of very rare AAA long-term bonds,' which are likely to yield over 6%. He added that 'this combination probably highlights market demand for some name diversification, even when huge supply creates issues.'
According to sources familiar with the plans, the initial price of the longest-dated note, maturing in 2066, exceeds Treasury yields by 1.35 percentage points. This is roughly comparable to the trading level of 40-year bonds from Alphabet and Amazon.com Inc., according to Trace pricing data, although they have lower ratings.
The bond issuance is managed by Wells Fargo & Co., JPMorgan Chase & Co., and UBS Group AG. The proceeds will be used for general corporate purposes, including capital expenditures. Microsoft and the banks either declined or did not respond immediately to requests for comment.
Microsoft reported strong results for its first fiscal quarter on Wednesday, recording a 48% increase in cloud services revenue while controlling capital expenditures, which reassured investors concerned about excessive AI spending. During the post-earnings conference call, CFO Amy Hood stated that the company would raise additional funds 'when it deems it attractive.'
According to Bloomberg, hyperscalers and data center developers raised over $313 billion this year through the sale of investment-grade bonds globally, almost three times more than in all of 2025. This sector drove global bond sales to a record $6.61 trillion this year, with two months remaining.
The influx of AI-related debt obligations has caused caution among some investors who are preparing for further borrowing to finance large-scale capital expenditure plans in this sector. These concerns are reflected in the credit default swap market, which is a form of insurance against non-payment.
Swaps related to hyperscalers with relatively weaker credit profiles have widened the most. For example, the five-year CDS on Meta Platforms Inc. debt, rated AA, was around 116 basis points on Thursday, according to ICE Data Services. This is 62 basis points higher than the cost of insuring Microsoft's debt, which is around 54 basis points. Swaps related to Oracle Corp., which has the weakest credit rating among major hyperscalers and is widely viewed as an indicator of AI debt risk, trade at a price of about 275 basis points, which is approximately 221 points higher than Microsoft's.
