Alphabet seeking $85 billion with stock facing 4-week losing streak

a month ago, alphabet crossed briefly NVIDIA By market cap. The stock has been falling since then, and is on pace to post its fourth consecutive weekly decline, the longest such decline in more than a year.

Alphabet is facing a similar market sentiment as it tries to raise $85 billion in new capital to help its artificial intelligence buildout. While Google has been Wall Street’s favorite megacap tech name over the past year, some skepticism is creeping into the story as the cash-rich company seeks even more money for infrastructure and to advance AI models it hopes will compete with offerings from Anthropic and OpenAI.

“I never thought Google would need to hit the public markets to raise money for its spending,” Dan Niles, founder of Niles Investment Management, said in an interview.

Niles said Alphabet has “the best stack in all of AI” at scale, citing its model, Tensor Processing Unit or TPU, Android distribution, cloud business and search dominance. This very power, he argued, is what makes such equity increases so impressive.

Like its hyperscaler peers, Google is spending historic sums of money on new data centers and the chips and systems needed to meet growing demand for AI compute. In April, the company raised its guidance for capital spending for the year to $190 billion from $185 billion.

before announcing on Monday that it would raise $80 billion in an equity sale, including a $10 billion investment Berkshire HathawayAnd then on Wednesday that number was increased to $85 billion, after Google had already secured more than $55 billion in fresh debt since November. Melius Research estimates that Google’s free cash flow will turn negative over the next few years as AI capex ramps up.

Until recently, investors were completely in on it. Even after four weeks of ups and downs, Alphabet shares are up more than 120% in the past year, hitting a record in mid-May. But a disappointing showing at Google I/O last month and concerns that the company is dangerously far behind in AI coding models contributed to the latest selloff.

There’s another big reason Alphabet’s equity markets are bullish: the IPO.

SpaceX is heading to the Nasdaq next week and aiming to raise a record $75 billion in its initial share sale. Anthropic has confidentially filed for an initial public offering, and OpenAI is expected to do so soon. This was the largest IPO in history till date Alibaba’s An increase of $21.8 billion over 2014. Each of the three mega offerings on the horizon will likely fetch multiples of that.

Alphabet may now want to tap the capital markets to shore up its balance sheet before asking investors to commit huge amounts of cash to new AI offerings. Niles said capital is not infinite, no matter how much of it is poured into the AI ​​business.

Alphabet is presenting this increase as a way to maintain financial flexibility while it accelerates spending. Executives are telling investors that stronger access to global debt and equity markets is becoming a strategic advantage given the scale of AI demand.

CEO Sundar Pichai said in an investor presentation that demand from enterprises and consumers “meaningfully exceeds” Alphabet’s available supply, calling it “a clear indicator of Alphabet’s unique opportunity.”

“Supporting all this at scale for our users, as well as serving enterprises and developers around the world, requires massive investment,” Pichai said.

After Alphabet’s capital spending more than doubled this year, Pichai said he expected it to increase “significantly” again in 2027, with the overwhelming majority going toward tech infrastructure.

CFO Anat Ashkenazi called the equity offering “a strategic proactive step to optimize our financial flexibility and maximize long-term shareholder value creation.”

Alphabet’s point is that the spending is already visible across the business, particularly in the cloud.

Google Cloud revenue grew 63% year over year in the first quarter to a record $20 billion, while backlog nearly doubled sequentially to more than $460 billion. Ashkenazy said AI solutions are now the largest contributor to cloud growth for the first time, and 75% of cloud customers are using Alphabet’s AI products.

The company is also trying to prove that its scale makes each new dollar of AI infrastructure more valuable than rivals.

Alphabet said it has reduced Gemini service costs by 78% by 2025, and Ashkenazy said hardware and engineering improvements have cut the cost of core AI responses by more than 30% since the launch of Gemini 3. These efficiency gains are important at a time when companies continue to boost spending on inference, model training, and AI coding.

Meanwhile, the company’s AI products are gaining popularity. Pichai said in the presentation that AI Overviews now has more than 2.5 billion monthly users, while AI Mode has crossed 1 billion monthly users a year after its launch.

HSBC analysts said in a report that further capital increases are likely in a hyperscaler scenario, as all the big players try to keep pace with demand and avoid falling behind their rivals.

Goldman Sachs CEO David Solomon, whose company Alphabet is involved in the transaction, suggested the equity offering would be a kind of test for the market, calling it “the first real solid data point” for these large-scale AI share sales.

He warned that, while there is plenty of money around the world to finance the current level of financing, sentiment could change rapidly, especially given the unprecedented amount of capital being raised.

“We are certainly in a moment where there is more greed than fear,” Solomon told CNBC’s Leslie Pickler in an interview at the Economic Club of New York this week. “When capital is available, if you consume capital and it is available, take the capital.”

— CNBC’s Jennifer Elias contributed to this report.

Watch: Anthropic’s $200 billion commitment to Google Cloud narrows the Alphabet-Nvidia gap