No. of Recommendations: 1
"" Taking upwards of $300 billion from this tech-focused market, which has already added more than 25% to the Nasdaq since the start of the second quarter, is going to be costly.
It may be even trickier to do so when the U.S. and Iran talks remain in a stalemate, Russia is launching a major offensive in its war with Ukraine, America’s economy is vulnerable to an energy shock, and long bond yields are testing multidecade high.
Markets have absorbed an astonishing amount of headline risk since the war with Iran began in February, and staged one of the strongest equity recoveries on record.
Whether it can manage the billions in new capital needed to fuel its AI ambitions without putting those gains at risk remains to be seen.
Alphabet’s AI Fundraise. Berkshire’s In for $10 Billion.
Alphabet is raising $80 billion in a series of equity sales to fund its artificial intelligence ambitions. The potential for the huge equity offering, which includes a $10 billion sale to Berkshire Hathaway, wasn’t mentioned during its earnings call in April, when it emphasized its strong internal cash flow.
• The Google parent has also raised $85 billion in debt financing over the past year. This offering includes $40 billion in shares sold at the market starting in the third quarter, the $10 billion private placement with Berkshire, and $30 billion in underwritten offerings of shares and convertible preferred stock.
• Alphabet said the offering is part of a “balanced way” to fund investments while maintaining a “healthy balance sheet.” Its capital needs are large, seeking $180 billion to $190 billion in 2026. Alphabet has also said that it expects capital expenditures to “significantly increase” in 2027 relative to 2026.
• Berkshire already had a sizable Alphabet stake of 58 million shares at the end of March, which had a $22 billion value as of Monday. It’ll now hold about $32 billion of Alphabet stock, making a top Berkshire equity holding behind only Apple, American Express, and about equal to Coca-Cola.
• Berkshire is paying about $352 a share for the Class A stock and $348 for the class C stock. That’s a 6%-plus discount to the closing prices of Alphabet stock Monday. Big equity offerings often are sold at discounts to the market price.
What’s Next: The $15 billion of convertible preferred stock will likely be among the largest such offerings sold. The plan shows how quickly Alphabet has flipped from buying back billions of dollars of its shares in 2024 and 2025 to no repurchases in the first quarter and now selling stock.
—Andrew Bary""
