Google Plans $80 Billion Sale for AI Infrastructure Funding

Google is planning to sell $80 billion to fund spending on artificial intelligence (AI) infrastructure. With this sale, the Alphabet-owned tech giant could execute the largest equity capital markets transaction in history.

According to data compiled by Bloomberg, Google’s combined offering would top Brazilian oil producer Petroleo Brasileiro SA’s roughly $70 billion sale of common and preferred stock in 2010. The deal also includes a $40 billion at-the-market (ATM) offering, expected to commence in the third quarter.

This strategy would allow Alphabet to sell off shares in the market over time without having to report each sale, although it would still be required to disclose how much it raises through periodic regulatory filings.

The broader fundraising package includes a $15 billion marketed sale of common stock, a $15 billion mandatory convertible preferred stock offering and a $10 billion private placement with Berkshire Hathaway. The remaining $40 billion will come through the ATM programme.

The announcement came as SpaceX is reportedly preparing to market what could become one of the largest initial public offerings in history. Alphabet's fundraising plan has instead shifted attention to the public equity markets, given the scale of the transaction.

Berkshire Hathaway has agreed to purchase Alphabet's Class A and Class C shares at a 6.5% discount to their respective closing prices on Monday before the deal was announced.

Strong investor demand for Google's stock sale

The common stock and mandatory convertible preferred stock offerings have attracted demand exceeding the available shares, according to people familiar with the matter.

The $15 billion mandatory convertible preferred stock component is also notable because of its size. Mandatory convertible preferred shares differ from traditional convertible bonds as they must convert into common stock on a specified future date. Alphabet's securities are scheduled to convert into common shares after three years.

Companies often use mandatory convertible preferred stock because it can provide financing at a lower cost than debt, delay immediate dilution for existing shareholders and is generally treated as equity rather than debt by credit rating agencies.

The offering marks Alphabet's first equity sale since a $2.1 billion fundraising exercise in 2006. The company is proceeding with the transaction despite reporting $126.8 billion in cash and cash equivalents at the end of March and having raised more than $85 billion in debt markets over the past year.

The proceeds are expected to support Alphabet's growing investment in AI infrastructure amid intensifying competition among technology companies. Goldman Sachs, JPMorgan Chase and Morgan Stanley are leading the underwritten portions of the transaction and managing the ATM programme. Goldman Sachs also advised on the private placement with Berkshire Hathaway.