Alphabet’s record-breaking $85B raise for Google’s AI business is a helluva good signal

If Alphabet’s record $85 billion share sale is a sign of investor appetite for AI-related offerings — and it is — it’s safe to say investors are voracious.

Google’s parent company initially planned to sell an initial tranche of $40 billion worth of different equity instruments: two different share classes, plus smaller “deposit shares” priced to be accessible to a broader range of investors. But the offering was so oversubscribed that it raised $45 billion instead, CEO Sundar Pichai said in an interview message on X on Monday. Among the buyers: Berkshire Hathaway, still known for its penchant for value investing, has raised $10 billion.

Alphabet plans to sell another $40 billion next quarter, for a total of $85 billion.

Even $80 billion would have surpassed the record share offerings previously set by Brazilian oil producer Petroleo Brasileiro SA, which raised $70 billion in 2010. Bloomberg reports.

Now it’s true that these investors are buying shares of Alphabet, not shares of a younger, potentially debt-ridden AI startup. Alphabet is a very healthy company: revenues of $110 billion in the first quarter alone (with high profit margins), an increase of 22% year over year.

Yet the money from this stock sale is intended for AI. “Part of our multi-year investment strategy to meet the AI ​​opportunities before us and support the demand we see from businesses and consumers,” as Pichai described it. At Google I/O last month, he said The company expects to spend between $180 billion and $190 billion on capital expenditures before the end of the year – much of it on AI infrastructure and data centers.

The timing is important beyond Alphabet itself. As Anthropic prepares to go public, this hugely successful stock sale is a very good sign for the broader AI IPO pipeline. It indicates that public investors, especially the deep-pocketed institutional investors, are ready to get their money.

SpaceX’s upcoming IPO is expected to break records in terms of money raised and valuation, and Anthropic’s deal is expected to do the same and possibly surpass SpaceX. OpenAI is also waiting in the wings.

But all this depends on whether the appetite of public investors – and not just private venture capital funds – remains strong and stays that way. An unprecedented one nearly $8 trillion in AI spending set for the next five years. That money has to come from somewhere – and that includes individual company revenues, loans and capital raised through stock sales. Whether the public markets have the guts to absorb so much for so long is the question every AI company looking at an IPO should be thinking about now.