What AI Money Costs, Borrower by Borrower

NEW YORK, Nov. 4 — Microsoft,Microsoft, Oracle and Meta, three of the companies building out artificial intelligence, sold $50 billion of dollar notes between Oct. 29 and Nov. 3, and lenders charged each a different price. On notes due in 2046, priced against the same Treasury bond, Microsoft’s priced at 85 basis points over Treasuries, Meta’s at 200 and Oracle’s at 335, according to the pricing terms each filed with the Securities and Exchange Commission.Basis PointsA basis point is a hundredth of a percentage point. The spread is what a company pays above the yield on the Treasury security named as its benchmark when the notes are priced.

The ranking matches their credit ratings, although the deals priced on different days. Microsoft is rated Aaa by Moody’s and AAA by S&P; Meta Aa3 and AA−; and Oracle, by the grades it expects, Baa2 and BBB−. Microsoft’s and Oracle’s notes settle today, and Meta’s on Thursday.

The difference is real money. On each $1 billion of those 2046 notes, Microsoft’s 6.150 percent coupon costs it $61.5 million a year, Meta’s 7.350 percent $73.5 million and Oracle’s 8.650 percent $86.5 million. For each $1 billion of face value, Oracle’s annual coupon on its 2046 notes is $25 million higher than Microsoft’s. While all the notes are outstanding, Oracle’s coupons on the whole $10 billion it sold come to about $777 million a year; Meta’s about $990 million on $15 billion; and Microsoft’s about $1.28 billion on its $23 billion of fixed-rate notes, plus floating interest on $2 billion more.

The Ladder

Each company sold a ladder of maturities. Microsoft’s eight fixed-rate notes, priced on Oct. 29, run from 2028 to 2066 at 25 to 105 basis points over Treasuries. Oracle’s five, priced on Nov. 2, run from 2029 to 2046 at 240 to 335. Meta’s five, priced on Nov. 3, run from 2031 to 2056 at 110 to 220.

Where two companies priced against the same Treasury note, the gaps are easiest to compare, though they also reflect the different days the deals priced. On notes due in 2031, against the Treasury due Oct. 31, 2031, Oracle pays 275 basis points and Meta 110, a gap of 165. Against the Treasury due August 2036, Microsoft’s 2036 notes priced at 65, Meta’s at 160 and Oracle’s 2037 notes at 310. On 2029 notes, against the same Treasury, Oracle pays 240 and Microsoft 35.Why SpreadsThe three deals priced on different days, and Treasury yields moved between them: the Treasury due August 2036 yielded 4.945 percent in Microsoft’s terms, 4.915 percent in Oracle’s and 4.952 percent in Meta’s. A spread takes out the benchmark’s level; a coupon does not. Neither holds the rest of the market still.

The week’s money did not stop at notes. Oracle also sold 86.2 million shares at $116 each, for net proceeds of about $9.9 billion, and on Nov. 2 Meta received about $1.87 billion for more of its mandatory convertible preferred shares, sold to underwriters who had exercised an option on Oct. 29. Alphabet sold €6 billion of notes on Nov. 2: €5.25 billion at fixed rates, 40 to 185 basis points over euro mid-swap rates, a different yardstick that does not sit on the same scale, and €750 million at a floating rate.AlphabetAlphabet is rated Aa2 by Moody’s and AA+ by S&P, both with a stable outlook, by its term sheet. Its fixed-rate euro coupons run from 3.700 percent, on notes due 2028, to 5.250 percent, on notes due 2045. Microsoft, Oracle and Meta each give the use of the notes’ proceeds as “general corporate purposes”; Microsoft and Oracle say that may include capital expenditures.

Dearer Than Before

Meta and Oracle are each paying more over Treasuries than they did themselves earlier this year. When Meta sold $25 billion of notes on April 30, its 2031s priced at 53 basis points and its 2046s at 122; this week its new notes due in the same years priced at 110 and 200. When Oracle sold notes on Feb. 2, its 2031s priced at 115 and its 2046s at 170; its new notes due in those years priced at 275 and 335 on Monday. Oracle’s new 2031 and 2046 notes priced 160 to 165 basis points wider than the ones it sold in February; Meta’s, 57 to 78 wider than in April. The filings do not say how much of that is the corporate bond market as a whole and how much is the borrower.

The filings also show the borrowers’ balance sheets and financing plans. Meta held $82.4 billion of cash and marketable securities at Sept. 30, against $80.9 billion of long-term debt, before this week’s notes. Its term sheet prints Moody’s outlook as stable and S&P’s as negative. Oracle’s prospectus counts $125.3 billion of senior unsecured borrowings at Aug. 31, and says it expects “to incur additional borrowings or other liabilities under vendor financing, leases and other financing arrangements.” Oracle expects a negative outlook from Moody’s. Oracle’s case, set out at its investor day on Oct. 28, is that capital spending peaks in fiscal 2027 and 2028 and steps down in fiscal 2029, “supporting positive free cash flow of at least $30 billion” that year.

The ratings do not explain everything. Microsoft’s $25 billion, its first sale in the U.S. investment-grade market since 2017, drew $115 billion of orders at its peak, Bloomberg reported, citing people familiar with the matter for the orders; yet its 30-year notes priced at 95 basis points over Treasuries, while Procter & Gamble, rated lower, sold 30-year bonds the same week at 60, by Bloomberg’s account. “But when you get out into that 30-year, you still have some risks that you need to price in, in terms of what the business model is going to look like,” Ayako Yoshioka, a senior investment strategist at Wealth Enhancement, said, as quoted by Bloomberg.

Who Pays

Oracle’s notes were priced at yields to maturity of 7.062 to 8.667 percent, with maturities of three to 20 years, against 5.036 to 6.183 percent on Microsoft’s notes due 2029 to 2046; Oracle may redeem its notes early, under their terms. Oracle pays on both sides of its ledger: 86.2 million new shares, sold at $116, and about $777 million a year of interest. “The credit markets are doing a lot of the heavy lifting for sorting out winners and losers at this point,” Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, said, as quoted by Bloomberg. “The market remains open for issuance, but not for everybody.”

The market remains open for issuance, but not for everybody.

What to watch is who comes next, and at what price. Meta’s prospectus says it “may launch an offering of euro-denominated notes,” and that there is no assurance it will; Meta had filed nothing for such an offering on the SEC’s EDGAR system by 6 a.m. Wednesday. CoreWeave, which rents out computing for AI, reports its quarter on Tuesday, Nov. 10; its shares were down 1.97 percent in trading before the open, as of 5:10 a.m., on the morning after the election.