AMD Just Borrowed $4.75 Billion, More Than Triple Its Last Bond Sale

Advanced Micro Devices (NASDAQ: AMD) priced the largest bond offering in its history on Thursday -- $4.75 billion of senior notes, spread across four tranches maturing between 2029 and 2036.

The sale is more than triple the $1.5 billion the chipmaker raised in its last bond offering, in March 2025. And that sale had a specific job, helping fund the company's acquisition of server builder ZT Systems. This time, management says the proceeds are for "general corporate purposes, which may include the repayment of debt." In other words, no specific job at all.

A company usually borrows this much because it needs the money. AMD doesn't, at least not on paper. It ended its second quarter with $13.1 billion in cash and short-term investments, and it generated $2.4 billion in operating cash flow during the quarter alone.

What, then, is AMD preparing for?

AMD CEO Lisa Su. Image source: Advanced Micro Devices Inc.

A record sale at friendly prices

The four tranches break down like this: $1.25 billion due in 2029 at a 4.6% coupon, $1.5 billion due in 2031 at 5%, $1 billion due in 2033 at 5.25%, and $1 billion due in 2036 at 5.5%. Altogether, the new debt will cost AMD about $240 million a year in interest.

The notes priced at spreads of just 0.43 to 0.9 percentage points above comparable U.S. Treasuries. Bond investors are lending to AMD at rates barely above what they charge the U.S. government -- treatment usually reserved for the market's steadiest blue chips.

AMD raised $1 billion in a 2022 bond offering and $1.5 billion in 2025. Now it has borrowed $4.75 billion in one swing. The company's appetite for debt is stepping up, and quickly.

Why borrow now?

AMD's business is scaling at a pace that consumes serious capital.

Second-quarter revenue rose 50% year over year to a record $11.5 billion, up from $10.3 billion in the first quarter. The company's data center segment led the way, with revenue more than doubling year over year to $6.7 billion (58% of total revenue). What's more, management guided for about $13 billion of revenue in the third quarter, which would be roughly 41% year-over-year growth.

"We enter the second half with strong momentum as EPYC demand accelerates, Instinct deployments scale and Helios begins to ramp," said CEO Lisa Su in the company's second-quarter earnings release.

Helios is AMD's rack-scale artificial intelligence (AI) reference design -- essentially a blueprint for a full cabinet of its chips and networking that OEM partners build into their own systems. And ramping something like that likely means paying for capacity, components, and inventory well ahead of the revenue they produce.

Capital expenditures are part of the picture, too. AMD spent $808 million on them in the second quarter.

Its free cash flow of $1.6 billion, while healthy, is modest next to the build-out the company is guiding toward. Locking in three-to-10-year money at around 5% while business is booming is a sensible way to make sure funding can never become the constraint. And AMD is hardly alone here. Alphabet, for example, sold $25 billion of bonds in early August.

The balance sheet can carry it

Even after the new notes settle, AMD's finances look conservative. Total debt goes from about $3.2 billion to roughly $8 billion, while cash and short-term investments (already $13.1 billion before the proceeds arrive) will exceed that comfortably. After all, the new interest bill of about $240 million a year compares with $2.4 billion of operating cash flow in the most recent quarter alone.

In short, this borrowing doesn't appear to make AMD a riskier company in any meaningful way. If anything, I'd argue it strengthens the company's hand in a race where rivals and customers alike are spending heavily.

What does ask a lot of investors is the stock's price. Shares trade around $514 as of this writing, up more than 6% Friday, and the stock now costs more than 130 times its earnings over the past year. Earnings are growing fast enough to shrink that number quickly (earnings per share more than doubled year over year in the second quarter). But at that level, the price already assumes years more of growth like this.

The debt looks like the cheap part of the AMD story. The expectations are the expensive part.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Alphabet. The Motley Fool has a disclosure policy.