Alphabet’s (GOOG, GOOGL) planned $80 billion stock sale puts a new price tag on the AI race: Even Google’s cash machine is tapping Wall Street to keep up.
Investors noticed. Alphabet stock fell 3.9% Monday, its worst day in two months, as Wall Street digested what the deal says about the rising cost of AI.
For years, Alphabet spent more buying back its own stock than it spent on capital expenditures — the buildings, data centers, servers, and equipment that keep Google running.
Now AI has blown up that budget.
Alphabet expects capital expenditures to roughly double this year as it races to build more computing power for AI. That pushes spending on infrastructure far above the cash Alphabet has been sending back to stockholders through stock buybacks and dividends.
Buybacks, or stock repurchases, are when a company buys its own stock, often reducing the number of shares outstanding. Dividends are cash payments to stockholders. Together, they are the classic “thanks for owning us” move for mature companies.
AI is changing that math.
The $80 billion stock sale comes in four pieces: $15 billion of common stock, $15 billion of preferred securities that later turn into stock, a $10 billion Berkshire Hathaway (BRK-A, BRK-B) investment, and a $40 billion program that lets Alphabet sell stock into the market over time.
Alphabet is not short on cash. The company generated $174 billion in operating cash flow over the 12 months ended March 31 and has raised more than $85 billion of debt over the past year.
But the AI bill is now so large that Alphabet is adding stock sales to the mix.
That makes the deal both historic and practical. Alphabet’s planned raise would rank as the biggest stock sale on record, topping Petrobras’s 2010 sale and even SpaceX’s reported $75 billion IPO target.
The AI trade is no longer just about who has the best model. It is also about who can keep paying for the machines behind it.
Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at jaredblikre@yahooinc.com.
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