Google’s $80bn equity raise adds to that giant AI sucking sound

{"text":[[{"start":4.8,"text":"It is a golden rule of finance that what goes out must, at some point, come in. That’s why AI’s biggest spenders are starting to seek new ways to fund their habit. In recent days Elon Musk’s SpaceX and its rival Anthropic have filed for initial public offerings that together are likely to raise more than $100bn. And on Monday, Google parent Alphabet said it would sell $80bn of stock to help fund extravagant spending on data centres."}],[{"start":35,"text":"Google’s capital raise is a good example of how AI has made big numbers all but meaningless. To a $4.5tn company, an $80bn stock issue is practically a drop in the bucket at less than 2 per cent of its market capitalisation. Yet for the financial world at large, tech capital raisings are becoming substantial. Google’s new funds would be equivalent to almost 10 per cent of all equity sold globally last year, according to Dealogic."}],[{"start":null,"text":"

"}],[{"start":61.8,"text":"What matters more than the sums at stake is the shift they represent. Google has not raised equity capital since 2005. In effect the search giant has, since going public in 2004, had more money than it knew what to do with. Now, its spending plans are so colossal that even with $127bn of firepower in the form of cash and cash equivalents, it can no longer be quite so carefree."}],[{"start":88.55,"text":"Consider how AI has reshaped Google’s finances. Five years ago, its capital expenditure on servers, network equipment and such was $25bn, which it funded out of operating cash flows of $92bn. In 2027, analysts expect $250bn of capital expenditure, versus cash flows of $260bn — a tighter fit. In its second quarter next year, Visible Alpha estimates suggest Google will spend more than it makes, for the first time in its listed history."}],[{"start":121.25,"text":"The result is that Google and peers such as Facebook owner Meta Platforms are now looking to outside money. The search giant recently launched a joint venture with private equity firm Blackstone that will build data centres that don’t burden its own balance sheet. Even so, that balance sheet is no longer pristine, thanks to $100bn of outstanding bonds, by LSEG’s count. Of those, $89bn were sold in the past two years."}],[{"start":149.65,"text":"True, Google is hardly over-reaching. It remains very lean, at least compared with a typical old-world industrial company. Its total debts remain smaller than its cash pile, even before the new equity issue. Going into the red for a single quarter would be uncomfortable but tolerable. And unlike OpenAI and Anthropic, for whom it really is AI or bust, Google has a huge advertising business that makes more than $200bn of revenue a year."}],[{"start":177.75,"text":"Indeed, as tech groups pass around the hat for outside capital, it’s everyone else who should feel uneasy. Silicon Valley is sucking more and more cash out of the market, and producing an ever greater supply of stocks and bonds that find their way into almost every portfolio. Meanwhile, the resultant spending pushes up the price of everything from chips and construction labour to household electricity. If tech companies’ investment was once their own business, now it’s everyone’s."}],[{"start":215.39999999999998,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1780448894_1921.mp3"}