How is Alphabet suddenly short of capital?
They have $100B on the balance sheet. The best time to raise capital is when you don't need it, and the worst time is when you desperately do.
Alphabet announces $80B equity capital raise to expand AI infra and compute
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Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#132Earlier quoted context omitted.
I have not tried the Gemini CLI in a few months but when I did it was a shit show. Google makes it very hard to use their shit and it was full of bugs. Anthropic's current run is based entirely around Claude Code in this space and the last time I used the gemeini-cli it wouldnt give me access to the latest models and I was paying them for the privilege
Google trashed the Gemini CLI client and replaced it with agy (antigravity), which is written in go and is much nicer.
Interesting you say that. Every user I speak to says antigravity cli is missing lots of features and Gemini cli was working quite well. Same for me.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#133Question 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?
If 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.
But 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.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#134Earlier quoted context omitted.
If 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.
But 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.
If you were anticipating the stock to drop sharply in the future, this may be cheaper.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#135Earlier quoted context omitted.
I use anthropic's models daily, and sometimes switch to Gemini. Google is losing the marketing front BADLY, but their AI service is surprisingly great. It's far cheaper than anthropic for one. and for my kind of research it's just better.
I'm quite certain that Google's AI services are likely the most used in the world right now by virtue of having the widest distribution. It's in the search box. It's on your Android phone. Just because they aren't the preferred coding or research agent does not mean they are losing - that's a pretty small slice.
It can be everywhere, but that doesn't mean users are paying or even value it.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#136Earlier quoted context omitted.
Kodak problem. Kodak invented the digital camera but their revenue came from making photographic film. They were unable to take advantage of their invention because it would cannibalise their revenue. That didn't stop other people and the revenue died anyway. Google's main revenue is ads based on search. LLMs are a competitor to search. Creating better LLMs will cut into search volumes. In any large organisation this…
This is a sensible-seeming take at first blush, but it doesn't hold up to any scrutiny (or maybe my scrutiny is faulty - you tell me!) Sundar and many of his executives have certainly read or heard of The Innovator's Dilemma, and I expect they're all moderately paranoid that it will be their downfall. Also, that's not it. Google has a great ai app called Gemini where they have at various points hosted the top ai imag…
I heard Google search volumes by humans were declining, but I can't find the reference now so may be wrong. It's definitely changing the entire SEO industry.
Are they actually implementing ads in chat yet? I haven't seen an ad in Gemini yet.
Again, the results I've seen is that LLM results in search have resulted in more zero-click searches (as a proportion of all searches), which isn't increasing engagement? But again, I may be wrong, what are you basing your assertion on?
I didn't say they were blissfully ignoring anything. I gave them credit for knowing the situation they're in and doing something about it.
The problem that I was talking about (probably badly getting my point across) is that it's internal conflict and strife that causes the pain here. One part of the company is incentivised on increasing revenue on the existing business. The other part of the company is incentivised on increasing revenue for the new business. But the new business is at the expense of the old business, so it sets up internal conflict where each part of the business tries to protect its own incentives. And Google has always been afflicted with rife internal politics.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#137Very 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 docum…
excluding 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.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#138Earlier quoted context omitted.
My first thought was my finance professor telling us that companies always raise with equity when they think their equity is overvalued.
You’d think Berkshire would be at least passingly aware of that principle, though.
It’s not easy to buy such a large tranche of shares at a fixed and fair price in a single transaction!
Both parties get something they want this transaction. Alphabet gets the Berkshire halo effect and a guaranteed buyer of $10 billion worth of equities, Berkshire gets a large tranche of equity at a price they believe is fair.
I think they view Alphabet as their next Apple, and a relatively safe place to ride out whatever happens with AI: Alphabet is fairly well positioned for the upturn or the downturn, especially now with this expanded warchest of cash.
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#139Earlier quoted context omitted.
If 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.
But 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.
Offering 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%
Re: Alphabet announces $80B equity capital raise to expand AI infra and compute
#140Earlier quoted context omitted.
I'm quite certain that Google's AI services are likely the most used in the world right now by virtue of having the widest distribution. It's in the search box. It's on your Android phone. Just because they aren't the preferred coding or research agent does not mean they are losing - that's a pretty small slice.
It can be everywhere, but that doesn't mean users are paying or even value it.
See also: Windows / Notepad / M365 / GitHub / Paint / Xbox / Azure / Solitaire / D365 / Security Copilot.