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Alphabet announces $80B equity capital raise to expand AI infra and compute
- nalekberov 4mo agoWe will soon see "improved" 'AI Mode' most likely.
- dude250711 4mo agoYep, another investment into Duck/Kagi PR push - money well-spent.
- mgh95 4mo agoInteresting how the market has reacted to this news (down 1.7% after hours)
- tptacek 4mo agoWell, I mean, you'd expect this move to mechanically push share prices down.
- addaon 4mo agoWhy? There’s $80B of dilution from new shares issued, so to keep share prices constant market cap would have to increase by $80B. Simultaneously, there $80B in additional assets on the balance sheet, so if the company was previously correctly valued at $N market cap it would now be correctly valued at $N+$80B market cap, right? My intuition is that capital raises, just like stock buybacks, should be first-order (“mechanically”) share price neutral.
- mgh95 4mo agoThis is true in a "yes but" sense. Typically equities of the mega caps benefitted from debt issuance on the expectation it would accelerate growth. The change to equity value loss is what is interesting: the market no longer sees this as generating growth, at least not like it used to.
- jsnell 4mo agoBut stock buybacks shouldn't be price-neutral by default? The entire point is to increase the unit price of the remaining shares. And in this specific case, selling shares to Berkshire at a 5% discount has a pretty clear signalling effect.
- paulddraper 4mo agoIn theory a buyback is price neutral. The company has less cash in the balance sheet, so its market cap decreases. But there are fewer shares, so the share price is the same. (This allows hypothetical future growth to disproportionately benefit existing shareholders, but does not intrinsically increase stock price.) In practice, like another poster pointed out, it signals the company’s belief that its own shares are undervalued, so the market usually increases its estimation of value.
- k22 4mo ago(intrinsic) value neutral not price. price is more broad and brings in supply vs demand effects.
- fancyfredbot 4mo agoIn theory a dividend is also price neutral. You have the dividend now but the company you owned doesn't any more. However, if someone gives you a dividend you typically have to pay tax, and lots of people really hate paying tax. So buybacks are the preferred price neutral way of dealing with excess cash.
- paulddraper 4mo agoThe dividend amount plus share price is neutral. But before-paying-dividend versus after-paying-dividend decreases the value of a share.
- asdfaoeu 4mo agoDividends are absolutely not price neutral however most feeds correct for them.
- gbnwl 4mo agoDon't forget that the denominator (total number of outstanding shares) will be increased by this as well. So even if the market cap reacted exactly one to one like you're proposing the per share price wouldn't stay constant necessarily.
- addaon 4mo agoThat's exactly the point... the total number of outstanding shares increases, as does the capital value. These changes should cancel out.
- nostrademons 4mo agoFirst-order, yes. In practice there's a lot of issues with asymmetric information. The company knows its own operations and financial position better than random traders on Wall Street. It is rational for it to buy back stock when the market value is lower than the true intrinsic value of the company, and to sell stock when the market value is higher than the true intrinsic value of the company. Therefore, traders often treat buybacks as a signal that the company is "cheap" (at least in the company's own view) and pump up the price accordingly, and treat stock issuances as a sign that company management believes that the stock is "expensive" and push it down accordingly. Company management has more inside information than market participants do, but is usually prohibited from trading on it. Stock issuances and stock buybacks are one of the few cases where insider-initiated trading is legal, because the benefits accrue to the company as a whole rather than a few individuals.
- hollerith 4mo agoI agree, and traders will also take into account the fact that there is a gold rush going on (into AI) and consequently view this issuance as not as much of a sign that company management believes that the stock is expensive as they would have if no gold rush were going on.
- tb99 4mo agoSupply and demand of Google equity. The fundamental value of a share doesn't change, but you now need more investor capacity to hold the equity. So you need to sell to investors who weren't quite willing to pay the previous price. It's not based on the fundamental value of the stock so maybe you wouldn't consider it "first order," but I think you can still call it "mechanical."
- tjwebbnorfolk 4mo agoOk but GOOG also has a ~$70B per year stock buyback program for that. It's a little goofy to be buying back and issuing $80B of new shares at the same time.
- HWR_14 4mo agoSpaceX has been buying back employees stock and issuing new stock to investors. So have a lot of private companies.
- tjwebbnorfolk 4mo agoOk but Google is not doing that, they are buying from the public market and issuing to the public market (minus the $10B berkshire issue)
- panarky 4mo agoMaybe the market price drop has less to do with dilution, and more to do with suspending share buybacks for a while.
- mgh95 4mo agoSure but people are no longer expecting these kinds of actions to generate equity gains. Before it was expected the growth would outpace the cost of capital, leading to equity appreciation. The directional change is what is interesting.
- B-Con 4mo agoThey added $80 out of a $4.5T market cap, which means redistributing ~1.67% of value from shares outstanding to the new shares. So being down 1.7% is literally exactly what you'd expect.
- asdfaoeu 4mo agoNot at all since the company is also +80bn cash.
- dnnddidiej 4mo agoBut they are about to set it on fire? But null hypothesis p=0.3 or something right?
- JacobAsmuth 4mo agoSet it on fire? I'm confused what your model of Google leadership is. Do you think they're being duped? Or controlled in some way? What is your theory of mind for Sundar's decision making process here. That he's committing fraud? Because the obvious answer is that he has compelling financial data telling him that this $80B now will produce a positive return on investment in the future. But you of course seem to disagree.
- dnnddidiej 4mo agoNot me I have no dog in the fight, I am trying to mindread the market.
- HDThoreaun 4mo agoOnly if shareholders think google is gonna light the money on fire
- swiftcoder 4mo agoHow is Alphabet suddenly short of capital?
- SecretDreams 4mo agoAre we watching the same AI capex spending choices over the last 1-2 years? Every company from megacorps to small fish are spending well in excess of profits on these capex expansions. No ROI timelines yet established....
- hobofan 4mo agoGoogle has a committed cloud compute backlog of $462b. That's their compute buildout for the next ~2.5 years completely financed.
- chatmasta 4mo agoYou don’t raise money because you’re short on capital. You raise when you’re in a position of power and capital is cheap.
- sandeepkd 4mo agoOr if you think that you may not be able to raise this kind of money if the AI story goes down after all these IPOs
- AndrewKemendo 4mo agoBoth of these tell the actual market position: 1. There’s real profit/value expected in pursuing the full automation of the labor market to the extent that the Board will approve large debts to known allies (BH) who only invest in long term infrastructure. So they are investing in more AI infrastructure with long term capital because they see the payoff in the long term. 2. That also means they aren’t doing market moving plays in public like selling corporate debt because they don’t want to be in the short term froth with a long term bet.
- plmpsu 4mo agoQuoting: In addition, Alphabet has reached an agreement to sell $10 billion of stock to Berkshire Hathaway Inc. in a private placement, comprised of $5 billion in Class A Common Stock at a price of $351.81 per share and $5 billion in Class C Capital Stock at a price of $348.20 per share. This investment by Berkshire Hathaway adds to the position it has built since Q3 2025.
- bel8 4mo agoThey know Google has a ton of data to train LLMs on. Recently I have been asking YouTube's new AI about some videos ("when is Steam metrics mentioned in the video?" for example), which means they also index videos. This is an unthinkable amount of data. I'm actually impressed at how bad Alphabet is with LLMs since they invented the thing as we know AND have all the data to train on, yet OpenAI and Anthropic are eating their pie.
- CamperBob2 4mo agoNot only that, but the same webmasters who try to shoo AI crawlers away actively court Google's bots.
- cj 4mo agoReally? Every business owner I know outside of HN wants to be discoverable by LLMs.
- iamacyborg 4mo agoBeing discoverable is one thing, having your content stolen wholesale is another
- Polizeiposaune 4mo agoAnd having your content rendered inaccessible to humans by a DDoS attack from overly aggressive webcrawlers that ignore robots.txt is yet another.
- rybosworld 4mo agoInteresting timing with the Spacex/Anthropic/OpenAI ipos coming up
- PessimalDecimal 4mo agoProbably not so coincidental! At least part of this is slated for employee stock comp. Could be to keep their talent from running.
- i_have_an_idea 4mo agoso, at a 8% discount at current prices.
- deleted 4mo ago[deleted]
- 1298716 4mo ago[flagged]
- iamacyborg 4mo ago> It is odd that they cite customer demand just after people leave Google for DuckDuckGo due to AI enshittification. You’ll probably find this is extremely limited to whatever circle you find yourself in
- verdverm 4mo agoThe other thing people do is associate google only with their consumer facing products. Their cloud business is growing like crazy and they have the best Ai chips for running efficiently/economically at scale (TPUs, vertical integration). There's a reason they run everyone's models better than they can themselves on nvidia cards
- argee 4mo agoAs long as the default on Chrome, Firefox, and Safari is Google, I doubt any of this "retaliatory flight" registers as even a blip.
- tweaktastic 4mo ago> After the probable IPO failures of SpaceX, OpenAI and Anthropic no one will give them money. People are going to line up for all of them. Hype sells these days.
- dyauspitr 4mo agoNo one is using DuckDuckGo. Those IPOs are going to go gangbusters, atleast for a while.
- protocolture 4mo agoHey 3 hour old account, how will we keep you accountable when they successfully IPO? Like I am a downer on these companies too but idiots are lining up to buy.
- bix6 4mo ago> The ATM program is intended primarily to facilitate, for a period of time, an administrative change in how Alphabet meets tax obligations associated with employee equity grants. This approach will mimic a “sell to cover” model: upon vesting of restricted stock units, shares will still be delivered to employees net of taxes, and the company will use corporate cash to settle taxes on behalf of employees. The company intends to issue stock for equivalent proceeds through its ATM program. This is an interesting change. Essentially just gives more timing control?
- Sol- 4mo agoVery interesting. Often I only perceive the stock market as existing equity changing hands and the stock value of the company not being immediately relevant for its success (it's just third parties trading ownership around, after all), but I rarely heard of cash raises for the company after the initial IPO - of course only because I didn't pay attention and mostly IPOs make the news. It's insightful to put such documents into Claude and see how they use many different financial mechanisms to raise the money. $15B sold directly to the big banks, $40B sold to the market (but also facilitated by these banks), a direct investment (PIPE) from Berkshire. Pretty cool how financial markets do these things.
- missedthecue 4mo agoexcluding IPO proceeds, existing public companies in the US raise about $200B a year through selling shares on stock markets. This DOES NOT include stock-based comp, which is simply another form of funding operations post-IPO using public markets. Stock based comp is another $350B a year in US markets alone. So if you think about public markets as an avenue for companies to raise capital, post-IPO firms are doing it to the tune of more than half a trillion a year.
- ycui7 4mo agoso google had spent too much money to build their own datacenter?
- kamaraju 4mo agoLink to the FWP (Free Writing Prospectus): https://www.sec.gov/Archives/edgar/data/1652044/000119312526251733/d160205dfwp.htm https://www.sec.gov/Archives/edgar/data/1652044/000119312526...
- afavour 4mo agoIt’s difficult to avoid the feeling that a horrible financial reckoning is on the way. All these big tech firms are spending wildly to make sure they are the one on top at the end of it all. But whoever that ends up being there’s going to be one hell of a lot of fallout underneath them.
- m463 4mo agoPersonally I wonder if these AI services will have a different price soon. Like how the early railroads or oil companies shook out and cost more than expected.
- tracerbulletx 4mo agoMaybe, but inference costs can come down too with more purpose built hardware and continual optimization and quantization strategies.
- onlyrealcuzzo 4mo agoI don't understand where this $80B, +$150B for SpaceX, +$??B for each Anthropic and OpenAI is going to come from. There's not that much cash sitting around. Something is gonna need to get sold to transfer into those assets. Unless central banks are just going to print money to invest in these companies, I don't know who else is going to be able to take on enough debt to prevent massive sell offs somewhere for this. It's not like ~$400B is pocket change...
- impulser_ 4mo agoI don't think you understand the size of the US capital market. We are talking probably ~150 trillion. It's easy as fuck for Google to raise this money because they are a money printing business. They are the most profitable company in the world, so for anyone this is basically the same as buying US debt.
- onlyrealcuzzo 4mo ago> We are talking probably ~150 trillion. Yes, but we are talking about liquidity not valuations...
- Fire-Dragon-DoL 4mo agoThis means they are buying more hardware and us gamers have to suck it up for 10 more years?
- thisisauserid 4mo agoThey do buy a ton of Nvidia but they seem to want to make their own chips more and more.
- topkai22 4mo agoWhich will take up fab capacity all the same. All the chips come out of the same TSMC (or possibly Intel) fabs
- pss314 4mo agoGoogle’s Data Center Buildout Could Top $1 Trillion https://archive.is/kG3p4 https://archive.is/kG3p4
- exabrial 4mo agoQuestion from an outsider: my perception is Google has lost $80b in excessive spending on teacups. I never thought I'd see them attempt to raise money, seems like they've always had an unlimited pile of it. Why is this necessary for them?
- missedthecue 4mo agoIf they can issue shares at ~30x earnings and deploy it in an accretive way, what is the argument against doing this? It's incremental ROIC below your cost of capital. One of the smartest things you can do in business.
- exabrial 4mo agoBut why finance it at all if you have (I assume) the cash laying around? That seems a tad risky if the bet doesn't work out. Not nitpicking your answer, I just don't understand.
- greesil 4mo agoIf you were anticipating the stock to drop sharply in the future, this may be cheaper.
- missedthecue 4mo agoOffering shares doesn't introduce balance sheet risk like debt does. There is no interest expense. You dilute the shareholders by about 1.67% but if this $80b can be deployed in a way that increases the value of the firm by more than that amount over the long term, it creates value and makes everyone better off, including the diluted shareholders. The risk if it doesn't work out is that everyone gets diluted 1.67%
- exabrial 4mo agoHh I didn't consider that. Produce more shares, have Berkshire buy them up at a lower price than the public, in exchange for capital right now. Berkshire can sell them for a profit later or participate in earnings. And with their shares at a premium right now, great time to do it.
- andrewstuart 4mo agoI thought Google was a cash machine what happened to that.
- merelydev 4mo agoThat's 80B that doesn't go to OpenAI or Anthropic.
- jbs789 4mo agoThat’s interesting. Being in the market now does shine a light on the difference in the businesses and says “we are here too!”…
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- felixfurtak 4mo agoAnd Alphabet already has an established customer base / product infrastructure to roll out it's AI products, and is highly profitable. This makes it a far less risky investment than a loss-making start up. Berkshire seems to agree. It's a great power play that can only hinder competitor IPOs.
- dgan 4mo agoSo they are buying another 32GB RAM stick, interesting
- greatgib 4mo agoIt looks crazy that with all the cash they have at end they can't sustain the cost of their own investments by themselves.
- casey2 4mo agoI think people don't understand that the value of the data generated by chats/agents is conservatively worth $200B a year. This is the so-called data-flywheel. Google is going to keep spending until they hit the break even point. More than a quadrillion high quality tokens per year. Pretty soon they will have an automated team of scientists doing basic and advanced research in every field. All those tokens will be fed back and make the model much more inference efficient.
- ksec 4mo agoAll these money spent on AI is simply mind boggling. Google expect to spend $1 Trillion over next few years. And that is not counting Amazon, Facebook, Microsoft, Apple, Tesla etc. I would have thought we have over built Datacenter before even AI came. There are enough Datacenter Rack space that replacing 5 - 8 years old server to newer 256 Core CPU would have increased their CPU per Rack by factor of 4 - 5. Saving significant space for future growth. Instead we are so behind in Rackspace we are now building out Datacenter faster than ever.