Alphabet is raising $80bn in equity, an unusually large sum for a company rarely asked for. Google’s parent company announced the plan on Monday to help finance what it called an investment in world-class AI computing infrastructure to meet unprecedented customer needs, and the structure of the raise shows as a major headline.
It comes in three parts. The first is $30bn in public offerings underwritten at one time, split equally between mandatory convertible preferred stock and common stocks and shares.
The second is a $40bn market offering, in which Alphabet will sell shares on the open market over time, expected to start in the third quarter.
Third, and the most eye-catching, is a $10bn private placement in Berkshire Hathaway, split between Class A common stock at $351.81 and Class C capital stock at $348.20, according to Alphabet filings.
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The Berkshire piece is a detail that turns a financial story into something more interesting. Warren Buffett’s company has historically been skeptical of highly valued technology and has been slow to write checks for cash-hungry construction materials.
The $10bn investment in Alphabet’s AI investment is a vote of confidence from an investor not known for chasing the theme, and it gives the brand a boost that lacks a market tranche, by its very nature.
Alphabet said it intends to use the proceeds from the IPO and private placement for general corporate purposes, including capital expenditures needed to scale up its AI infrastructure and global computing.
The sentence is broad, but the direction is unmistakable. The company is targeting spending of $175bn to $185bn by 2026, a number that has doubled over the past few years as hyperscalers race to build computing.
That race is the essence of promotion. Microsoft, Amazon and Alphabet are each spending tens of billions a year on AI infrastructure, and the bill has grown large enough that even companies with plenty of cash are turning to the stock market to spread the costs.
Raising stock instead of just drawing on cash or debt allows Alphabet to fund construction while keeping its balance sheet flexible, at the cost of some dilution to existing owners. Mandatory convertible preferred stock is a framework that companies often reach for to precisely soften that dilution, deferring the conversion into common stock while still counting toward the capital raised today.
What leaves open the announcement is the timing of the sale to the market beyond the third quarter, and the final size of each section, which could go with the share price.
Those will play in the coming quarters. For now, the most quoting line is the easiest. Alphabet, a company long associated with generating cash, is selling $80bn of stock to keep going.
