Investor Michael Burry, recognized for his foresight in financial markets, issued a significant warning on Monday regarding Alphabet Inc.'s (NASDAQ: GOOGL, NASDAQ: GOOG) decision to issue 100-year bonds. In a message posted on the social media platform X, he drew a direct parallel between Alphabet's current bond issuance plans and Motorola Solutions Inc.'s (NYSE: MSI) experience in 1997, a year tied to Motorola's notable decline after a similar financial move.
Burry stated, "Alphabet looking to issue a 100-year bond. Last time this happened was Motorola in 1997, which was the last year Motorola was considered a big deal." This statement positions the bond issuance as potentially indicative of underlying challenges or shifts within a once-dominant technology company.
Offering further context, Burry reflected on Motorola's market status at the start of 1997, emphasizing that the company held a prestigious position among America's top 25 companies by both market capitalization and revenue. During this period, Motorola's brand valuation was the highest in the United States, surpassing even that of Microsoft Corp. (NASDAQ: MSFT).
The investor then highlighted the rapid changes the market underwent shortly thereafter. In 1998, Nokia Oyj (NYSE: NOK) overtook Motorola in the competitive cell phone market. This shift was further accelerated following the introduction of Apple's iPhone, which further diminished Motorola's prominence among consumers. Presently, Motorola is ranked 232nd in market capitalization, accompanied by sales approximate to $11 billion, underscoring the scale of its decline from previous heights.
Meanwhile, Alphabet is reportedly proceeding with a substantial bond offering that includes 100-year debt instruments. Various media outlets have detailed that the company intends to issue bonds denominated in multiple currencies, including U.S. dollars, British pounds, and Swiss francs, with maturities spanning from a few years to a century. Specifically, sterling-denominated debt will have maturities from three to 100 years, while Swiss franc-denominated debt will mature between three and twenty-five years. These details were cited by The Wall Street Journal, referencing an investor familiar with the offering.
Requests for comment from Alphabet on this bond issuance have not been immediately addressed.
This bond strategy by Alphabet coincides with Michael Burry’s recent critiques of the technology sector's approach to artificial intelligence (AI) investments. Earlier in the year, Burry publicly challenged major technology firms such as Microsoft and Alphabet for their considerable expenditures on AI infrastructure, which he suggests may soon become obsolete. Furthermore, Burry has placed bets against Nvidia Corp. (NASDAQ: NVDA), questioning the long-term viability of the surge in AI chip demand.
At the time of reporting, Alphabet's stock price reflected a modest increase of 0.81%, trading at $325.71 according to Benzinga Pro data.
Key Points
- Michael Burry compared Alphabet's plan to issue 100-year bonds to Motorola's 1997 action, which preceded its decline from industry prominence.
- Motorola in 1997 was among the top 25 U.S. companies by market cap and revenue, with the most valuable brand in the country, outranking Microsoft.
- Following Nokia's overtaking of Motorola in 1998 and subsequent impacts from Apple's iPhone launch, Motorola’s market standing diminished substantially.
- Alphabet is planning a multi-currency, multi-maturity bond sale that includes debt instruments with maturities up to 100 years.
- Burry's recent skepticism about tech giants' AI investments adds a broader critical lens to Alphabet's financial and strategic decisions.
Risks and Uncertainties
- The issuance of century-long bonds by Alphabet may signal financial or strategic vulnerabilities, as inferred through the Motorola comparison.
- Market shifts in technology and consumer preferences, exemplified by Motorola's rapid decline, underscore potential volatility in brand and revenue strength.
- The sustainability of heavy investments in AI infrastructure by firms like Alphabet remains uncertain, with risks of obsolescence affecting long-term returns.
- The breadth and duration of Alphabet's debt obligations could influence future financial flexibility and risk profiles amid evolving market conditions.