Alphabet’s record $85 billion raise for Google’s AI business is a very good sign

If Alphabet’s record-breaking $85 billion stock sale is any indication of investors’ appetite for AI-related offerings — and it is — then we can safely say that investors are voracious.

Google’s parent company initially intended to sell a first tranche worth $40 billion of various equity instruments – two different classes of shares, plus smaller “depositary shares” that would be accessible to a wider range of investors. But the offering was so oversubscribed that it raised $45 billion instead, CEO Sundar Pichai said in a post on X on Monday. Among the buyers: Berkshire Hathaway, still known for its love of value investing, picked up $10 billion.

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

Even $80 billion would have surpassed the record for equity offerings previously set by Brazilian oil company Petroleo Brasileiro SA, which raised $70 billion in 2010, Bloomberg reported.

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

However, the money generated by this stock sale is allocated to artificial intelligence. “Part of our multi-year investment strategy to address upcoming AI opportunities and support the demand we are seeing from businesses and consumers,” 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 — largely on AI infrastructure and data centers — before the year is out.

Timing is important beyond Alphabet itself. As Anthropic prepares to go public, this highly successful stock sale is a very good sign for the broader AI IPO pipeline. This suggests that public investors, especially institutional investors with deep pockets, are willing to overpay.

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

But it all depends on the appetite of public investors – not just private venture capital firms – remaining strong, and then staying that way. Nearly $8 trillion in spending has been allocated to AI over the next five years. This money has to come from somewhere – this includes individual company revenues, loans, and capital raised through stock sales. Whether the public markets have the capacity to absorb this much, for that long, is a question that every AI company looking to IPO should be considering now.