Apple avoids AI debt pile, draws 42 trillion won in corporate bond orders

Apple has successfully raised $7.5 billion (about 10.17 trillion won) in the U.S. corporate bond market. Unlike rival big tech companies that have taken on massive debt to build large-scale artificial intelligence (AI) infrastructure, Apple's strategy of refraining from excessive capital spending has earned strong investor confidence, according to market analysts.

According to industry sources on Nov. 6, Apple issued investment-grade corporate bonds with seven maturities in the U.S. market on Nov. 5 (local time). Institutional investor orders reached about $31 billion (about 42.036 trillion won), more than four times the planned issuance amount. The sale came shortly after major U.S. technology companies issued about $50 billion (about 67.8 trillion won) in bonds to fund AI data center construction and other purposes.

The most notable aspect is the gap in borrowing costs with rival big tech companies. The spread on Apple's longest-dated bond, the 2036 note (10-year), was set at 0.55 percentage point over U.S. Treasuries, 0.25 percentage point lower than the initial guidance. In contrast, Microsoft, which recently raised funds for large-scale AI investments, saw a spread of 0.65 percentage point on a similar maturity, while Meta Platforms and Oracle recorded 1.6 percentage points and 3.1 percentage points, respectively. Even among large technology stocks, the credit premium demanded by the market differed depending on the scale of AI capital expenditures (CAPEX) and the potential damage to cash flow.

This rate differential stems from each company's capital allocation strategy. Competitors are pouring enormous sums into power facilities and their own data centers, but there is market skepticism about whether this spending will be recovered through actual cash flow. Apple, on the other hand, has pursued an on-device strategy of partnering with external models and enhancing the competitiveness of its mobile devices rather than expanding infrastructure aggressively. The absence of astronomical capital expenditures has lowered the risk of damage to free cash flow (FCF), giving investors a sense of stability.

The purpose of the funding is also a key factor boosting creditworthiness. In contrast to other big tech companies that rely on external borrowing to cover infrastructure investment costs, Apple plans to use the $7.5 billion raised for shareholder returns such as stock buybacks and dividends, as well as general operating funds. Analysts say Apple has opportunistically taken advantage of the low-interest-rate environment based on its solid financial structure, which carries an 'AA+' rating from S&P Global Ratings.

The bond sale's success is particularly significant as it came amid concerns that data center permitting and power grid regulations could be tightened following the recent U.S. midterm elections. At the time, the stock market plunged and credit default swap (CDS) premiums hedging default risk on investment-grade corporate bonds surged as much as 5.9% intraday, but Apple's bonds attracted record buying interest.

Uncertainty over AI profitability and the direction of infrastructure regulation is expected to keep market jitters alive until these issues become clearer. The gap in funding costs between companies that expand facilities through aggressive borrowing and those that restrain borrowing based on strong cash generation is expected to become a new barometer for the bond market.

※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.