Google owner Alphabet to sell $80bn in stock to fund AI spending spree | Alphabet
Google parent company Alphabet has announced plans to raise up to $80bn (£59bn) in equity capital to fund vast AI infrastructure investments, raising further questions about the economics of the AI boom.
The move, one of the largest ever equity fundraises globally, also includes the sale of $10 billion worth of shares to Berkshire Hathaway, the US investment group run by retired investment guru Warren Buffett for 60 years until last year.
Alphabet, which is behind the Gemini system that has increased its share of the AI chatbot market, said it would use the money to expand its “world-class AI computing infrastructure to meet unprecedented customer demand.”
The Californian company said: “AI is leading an expansionary period for Alphabet. The company is seeing strong demand from businesses and consumers for its AI solutions and services at levels that exceed the company’s current supply.”
“By scaling its investments, the company aims to expand its core infrastructure to support the significant growth opportunity ahead.”
But such a large fundraise is also a warning to markets that meaningful returns to investors have been limited so far, despite the billions of dollars spent on AI infrastructure.
Jim Reid, market strategist at Deutsche Bank, said Alphabet was reminding investors of the “unprecedented scale of the AI spending boom” and added: “Financing AI [capital expenditure] “The boom is becoming an increasingly important issue for markets.”
The decision to tap Berkshire Hathaway is also noteworthy. Under Buffett, known as the Sage of Omaha, Berkshire has frequently stepped in to provide financing to companies in need of cash. The famous $5 billion investment in Goldman Sachs at the height of the financial crisis. Berkshire has been investing in Alphabet since last summer.
In its filingAlphabet said half of the $80 billion will be allocated to “scaling its AI infrastructure and global computing,” while $40 billion will be earmarked to cover “administrative change in how it fulfills its tax obligations related to the granting of employee capital awards.”
The fundraising includes $10 billion from Berkshire, as well as a $30 billion seed raise and a flexible drip-feed mechanism of $40 billion that is not earmarked for AI investment but could be phased in over time.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said Alphabet’s fundraising was “a clear sign that the AI arms race is moving into a more capital-hungry phase.”
“There’s certainly a lot of money to be raised, but the devil is in the details. The entire $80 billion is less than 2% of Alphabet’s massive $4.6 trillion market cap… But no matter how it’s structured, one thing is clear. The days of tech giants as capital-based free cash flow machines are long gone.”
He added: “Alphabet is certainly spending from a position of strength, not boredom. Demand for AI computing is outpacing supply, Google Cloud’s growth has accelerated sharply, backlogs have increased, and Search is proving to be much more resilient than many feared. This gives more context to the investment case than some AI spending stories where it’s harder to see a path back.”
Alphabet has previously said capital spending is expected to reach $180 billion to $190 billion this year, with another significant increase expected in 2027.
Alphabet is “at the front of the race” in AI, Britzman said, “but investors will demand continued evidence that this growth leads not just to larger data centers but to lasting revenue growth.”
Alphabet is awaiting funding from investors before some of its main AI rivals attempt to join the stock market.
Anthropic, which has made its Claude chatbot popular with software engineers and other business customers, said Monday it has filed confidentially for an initial public offering on the U.S. stock market.
Following this year’s meteoric rise, Anthropic’s valuation is now $965 billion after raising $65 billion in funding; This means it has surpassed OpenAI to become the world’s most valuable startup.
Elon Musk’s SpaceX, which includes OpenAI and the xAI artificial intelligence startup, is also scheduled to go public this year.
