What Amazon is actually doing
Amazon has kicked off the sale of its debut bonds priced in British pounds, known as sterling bonds.
A bond is essentially a loan: investors hand Amazon money now, and in return the company promises to pay it back later with interest.
How the deal is structured
Amazon, the Seattle-based technology and e-commerce company, is offering the bonds in four separate chunks, or tranches, that mature after 3, 6, 12 and 19 years.
Early pricing discussions suggest the shortest bonds will pay around 70 basis points more than equivalent UK government bonds, known as gilts, while the longest could pay around 110 basis points more.
A basis point is a hundredth of a percentage point, so 110 basis points works out to just over 1 percentage point of extra interest.
Amazon has hired banks to arrange the sale, which could formally launch as soon as 10 September, depending on market conditions.
Why Amazon needs the cash
This bond sale is the latest step in a sustained borrowing programme Amazon has run throughout the year.
The company has been using that borrowed money to pay for enormous capital projects, including AI data centres, custom computer chips, and satellite broadband infrastructure.
The wider spending picture
Amazon's hardware ambitions extend beyond this bond sale.
Chipmaker Qualcomm has issued Amazon a warrant, a type of financial instrument, tied to rights worth around $4 billion, as part of a custom chip collaboration between the two companies.
Amazon is also expanding its Project Leo satellite internet business, teaming up with partners including AT&T to bring connectivity to business customers.
The bigger picture
Taken together, the bond sale, the chip warrant and the satellite expansion all point to the same underlying story.
Amazon is spending enormous sums to build the infrastructure it believes will power the next stage of artificial intelligence and connectivity, and it is increasingly turning to debt markets around the world, rather than just American ones, to help pay for it.
