Google’s parent company Alphabet, Inc. is engaging in some unusual and creative equity-raising practices for a large, publicly traded company. Long story short: it’s raising gobs of investor money that it can put toward expanding its footprint in AI hardware.
It plans to raise $80 billion via new “equity offerings” per Bloomberg. That includes $40 billion in new stock dripped into the stock market starting in the third quarter (meaning probably starting in July). For high rollers, Alphabet is offering $30 billion in special underwritten shares along with “mandatory convertible preferred stock,” backed by Goldman Sachs, JPMorgan, and Morgan Stanley.
And for good measure, Berkshire Hathaway is putting up $10 billion for shares. Expect an SEC filing shortly to clarify what kind of terms they’re getting.
And it’s coming at a noticeably inopportune time for anyone else competing for investors hungry for AI exposure. SpaceX, Anthropic, and possibly OpenAI have filed for initial public offerings, either confidentially in the case of Anthropic, or by releasing a big old prospectus like SpaceX.
In other words, if you squint, it sort of looks like Google is playing hardball with SpaceX and the others. Public offerings benefit from investors with bulging pockets, and Google is coming along and making their pockets bulge slightly less. As Bloomberg’s in-house analyst Mandeep Singh says in the Bloomberg article, “There’s only so much capital you can allocate, even in the public markets.”
Is it actually zero sum? Does competing in the equity markets on such a huge scale at such an auspicious moment dampen enthusiasm for the other companies’ IPOs? When you consider that investors (Robinhood users, say) can and do routinely pull money out of other stocks in the stock market to invest in an IPO, and this sort of thing is generally priced in (not to mention the fact that SpaceX is being fast-tracked into indexes like Nasdaq), then probably not all that much.
And I also doubt that large institutional investors gobbling up the bank-backed preferred stock are putting all their eggs in one basket. They can probably invest in all of the above too if they want.
However, the Berkshire part of the deal is a single, massive, concerted decision that genuinely siphons off $10 billion in capital investment that might have gone to these IPOs.
And this is all, according to Bloomberg, an effort to turbocharge Google’s chip-making operation. Its tensor processing units or TPUs have been competing internally with Nvidia’s GPUs for a while now, and could soon come for a piece of the AI processing pie if a critical mass of AI companies take an interest. Raising $80 billion is an effort to double down—or maybe triple or quadruple down—on Google’s AI silicon ambitions.
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