Alphabet Inc. is selling up to $80 billion in stock to fund its artificial intelligence infrastructure, with Berkshire Hathaway already chipping in $10 billion through a private placement. The company says the money will go toward data centers and “world-class AI compute” to meet what it calls “unprecedented customer demand” for its AI services.
Why Alphabet is turning to investors for cash
The Google parent has been racing to build out AI capacity to keep up with Amazon Web Services, Microsoft, and Meta Platforms. Those four companies are expected to spend a combined $700 billion-plus on AI infrastructure this year, and Wall Street analysts project that number will exceed $1 trillion in 2027.
Google CEO Sundar Pichai told analysts in April that “compute capacity” is what keeps him up at night. He said power, land, and supply chain constraints create a challenge in ramping up to meet the extraordinary demand.
Related: Intel touts 130 edge wins and new AI framework
Alphabet had already tapped debt markets heavily. In April it held a global bond issuance that exceeded $30 billion, then raised another $11 billion from European investors. That followed a $25 billion bond sale in November.
Now it’s issuing equity instead of taking on more debt. The plan includes $30 billion in underwritten stock offerings, of which half will be mandatory convertible preferred stock. Another $40 billion will come through an “at-the-market” program selling Class A and Class C shares starting in the third quarter. Berkshire’s $10 billion is a private placement handled by Goldman Sachs.
A familiar investor steps in
Warren Buffett’s Berkshire Hathaway has become one of Alphabet’s largest shareholders. It started buying Alphabet stock in the third quarter of last year, and before this announcement its stake was valued at about $20 billion. That makes the firm one of Berkshire’s top holdings, though Apple remains its biggest technology bet.
Berkshire initially invested $4.3 billion in November, a notable move into a sector it had largely avoided for years. The new $10 billion placement deepens that relationship, giving Buffett a bigger piece of Alphabet’s AI push.
Related: Expert Advice on Network and Beyond: Navigating Tomorrow’s Digital Landscape
Goldman Sachs is acting as the placement agent for the Berkshire deal.
Stock market reaction and analyst take
Alphabet’s stock has more than doubled over the past year, outpacing most megacap tech peers. Investors had cheered the company’s spending plans and returns from services like Gemini. But growth has slowed this year — the stock is up just 18% year-to-date and slipped in extended trading after the announcement.
Constellation Research analyst Holger Mueller called the stock sale a smart move. “The AI wars are heating up and it costs a lot of money to participate, with data centers being the main expense,” he said. “Alphabet’s AI buildout has already made a substantial dent in its cash flow, and it has dipped into the debt markets already, so a stock sale is its best option. There’s still a lot of money sitting on the sidelines that wants in on AI.”
Still, issuing $80 billion in new shares will dilute existing shareholders. The company did not specify how many shares it would sell or at what price. The at-the-market offering allows it to sell gradually, which might limit the immediate impact on the stock price.
Related: Oura files for US stock market listing
Debt versus equity in the AI arms race
Hyperscalers have mostly funded their AI buildouts through borrowing. Alphabet’s shift to equity financing is a reminder that even cash-rich tech giants can’t rely solely on debt when spending is projected to hit a trillion dollars annually. The firm’s own capital expenditure forecast climbed from an initial $175-185 billion range to $180-190 billion this year alone.
The underwritten offerings will be managed by Goldman Sachs, JPMorgan Chase, and Morgan Stanley. Those firms are likely to see healthy fees from the sale, though the banks themselves face growing scrutiny over their roles in financing AI infrastructure that consumes massive amounts of energy and water.
Whether Alphabet can sustain the pace of spending without hurting returns remains an open question. It says demand for its AI services is “exceeding the company’s available supply,” but that kind of language is common during tech booms. Investors will be watching whether the infrastructure buildout actually translates into long-term revenue growth, or whether it becomes a costly arms race with diminishing returns.
