Google’s parent company, Alphabet, Inc., is engaging in some unusual and creative capital-raising practices for a large publicly traded company. Bottom line: It’s raising huge amounts of money from investors that it can put toward expanding its footprint in AI hardware.
Plans to raise $80 billion through new “stock offerings” by Bloomberg. That includes $40 billion in new shares that entered the stock market starting in the third quarter (i.e., probably starting in July). For high rollers, Alphabet is offering $30 billion in special underwritten stock along with “mandatory convertible preferred stock,” backed by Goldman Sachs, JPMorgan and Morgan Stanley.
And just in case, Berkshire Hathaway is contributing $10 billion in stock. Expect an SEC filing shortly to clarify what kind of terms they’re getting.
And it comes at a remarkably inopportune time for anyone vying for investors eager for AI exposure. SpaceX, anthropicand probably OpenAI has filed for initial public offerings, either confidentially in the case of Anthropic, or by posting a great old leaflet like SpaceX.
In other words, if you squint, it looks like Google is playing hardball with SpaceX and the others. Public offerings benefit from investors with deep pockets, and Google is moving forward and making their pockets a little less deep. As Bloomberg in-house analyst Mandeep Singh says in the Bloomberg article: “The amount of capital that can be allocated is limited, even in the public markets.”
Is in fact zero sum? Does competing in the stock markets on such a huge scale at such an auspicious time dampen enthusiasm for other companies’ IPOs? Considering that investors (Robinhood users, for example) can and do routinely take money out of other stocks in the stock market to invest in an IPO, and this sort of thing is generally discounted (not to mention the fact that SpaceX is being accelerated in indices like Nasdaq), so probably not so much.
And I also doubt that the large institutional investors gobbling up bank-backed preferred stocks are putting all their eggs in one basket. They can probably also invest in all of the above if they want to.
However, the Berkshire portion of the deal is a single, massive, concerted decision that actually diverts $10 billion in capital investments that could have gone into these IPOs.
And all of this is, according to Bloomberg, an effort to boost Google’s chip manufacturing operation. Your tensor processing units or TPUs have been competing internally with Nvidia‘s GPU for a while now, and could soon grab a piece of the AI processing pie if a critical mass of AI companies take interest. Raising $80 billion is an effort to double (or perhaps triple or quadruple) Google’s AI silicon ambitions.
