In addition, Alphabet has reached an agreement to sell $10 billion of stock to Berkshire Hathaway Inc. in a private placement, comprised of $5 billion in Class A Common Stock at a price of $351.81 per share and $5 billion in Class C Capital Stock at a price of $348.20 per share.
This investment by Berkshire Hathaway adds to the position it has built since Q3 2025.
Recently I have been asking YouTube's new AI about some videos ("when is Steam metrics mentioned in the video?" for example), which means they also index videos. This is an unthinkable amount of data.
I'm actually impressed at how bad Alphabet is with LLMs since they invented the thing as we know AND have all the data to train on, yet OpenAI and Anthropic are eating their pie.
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 is extraordinarily difficult to manage - they have to incentivise the new tech that is actively harming the current revenues, while maintaining as much of the old revenues as possible, without creating internal conflict between these two parts of the organisation that will kill it.
Though in fairness to Google they do seem to realise this and are trying to adapt - they're letting the LLM folks mess with search. It'll be interesting to see how this goes.
In any case, it's well known that devs in Google have liked anthropic/openai models for coding more than gemini, so unless they're hiding their best models from the people within, I think it's just the case that they're behind.
Even with anthropics record breaking revenue growth I don't see how the pure AI companies can sustain, but the catch-22 is that any obvious pivot proves that. This puts the more traditional tech companies in position to ride the back of the wave until the growth curve tops.
Google has gone all in on AI. To the point of challenging their own core product. Apple is waiting and seeing. Google is building and distributing, albeit with terrible marketing.
Depends on the product - whether protein bars, salty chips, cellular service, or IPhone or something else. If your product has a flavor, it’s never going to get commoditized. Coke still tastes better than Pepsi.
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
https://github.com/google-gemini/gemini-cli/discussions/2727...
I get the complaints in that thread but I still think it is hilarious. That repo is a gong show to random shit and perhaps one of the best worst examples of "opensource" LLM development.
I know GAAP accounting won't recognize any capital gain on these treasury operations, but from an economic standpoint this financial judo creates a lot of value for existing shareholders.
Tech firms should always have a buffer and never get too close to the optimal debt ratio.
I think they have learned a lot re. what happens if you are asleep at the wheel now.
Yes. Their competition is deploying debt and Google has low leverage. They also have $100+ billion cash on their balance sheet.
> Tech firms should always have a buffer and never get too close to the optimal debt ratio
...why is this especially applicable to tech firms? (Or a tech firm like Google?)
This is an interesting change. Essentially just gives more timing control?
All these big tech firms are spending wildly to make sure they are the one on top at the end of it all. But whoever that ends up being there’s going to be one hell of a lot of fallout underneath them.
Why do you think there will only be one winner?
Like how the early railroads or oil companies shook out and cost more than expected.
At least not yet.
There's not that much cash sitting around.
Something is gonna need to get sold to transfer into those assets.
Unless central banks are just going to print money to invest in these companies, I don't know who else is going to be able to take on enough debt to prevent massive sell offs somewhere for this.
It's not like ~$400B is pocket change...
(2) Middle east oil money (Saudi Aramco's profit every year is $100B+)
(3) Public traders have been and are looking to cycle out of other investments into higher growth areas.
It's easy as fuck for Google to raise this money because they are a money printing business. They are the most profitable company in the world, so for anyone this is basically the same as buying US debt.
Yes, but we are talking about liquidity not valuations...
In practice there's a lot of issues with asymmetric information. The company knows its own operations and financial position better than random traders on Wall Street. It is rational for it to buy back stock when the market value is lower than the true intrinsic value of the company, and to sell stock when the market value is higher than the true intrinsic value of the company. Therefore, traders often treat buybacks as a signal that the company is "cheap" (at least in the company's own view) and pump up the price accordingly, and treat stock issuances as a sign that company management believes that the stock is "expensive" and push it down accordingly. Company management has more inside information than market participants do, but is usually prohibited from trading on it. Stock issuances and stock buybacks are one of the few cases where insider-initiated trading is legal, because the benefits accrue to the company as a whole rather than a few individuals.
And in this specific case, selling shares to Berkshire at a 5% discount has a pretty clear signalling effect.
The company has less cash in the balance sheet, so its market cap decreases. But there are fewer shares, so the share price is the same.
(This allows hypothetical future growth to disproportionately benefit existing shareholders, but does not intrinsically increase stock price.)
In practice, like another poster pointed out, it signals the company’s belief that its own shares are undervalued, so the market usually increases its estimation of value.
price is more broad and brings in supply vs demand effects.
However, if someone gives you a dividend you typically have to pay tax, and lots of people really hate paying tax.
So buybacks are the preferred price neutral way of dealing with excess cash.
But before-paying-dividend versus after-paying-dividend decreases the value of a share.
It's not based on the fundamental value of the stock so maybe you wouldn't consider it "first order," but I think you can still call it "mechanical."
So being down 1.7% is literally exactly what you'd expect.
1. There’s real profit/value expected in pursuing the full automation of the labor market to the extent that the Board will approve large debts to known allies (BH) who only invest in long term infrastructure.
So they are investing in more AI infrastructure with long term capital because they see the payoff in the long term.
2. That also means they aren’t doing market moving plays in public like selling corporate debt because they don’t want to be in the short term froth with a long term bet.
So I guess Google doesn’t think their stock is particularly cheap, but Berkshire Hathaway wants to buy more anyway. (At a slight discount.)
They are considered a very low risk and can borrow for a long time at low rates. They recently issued a 100 year bond.
They seem to have decided to issue equity rather than borrow more. This is probably so that they can maintain the ability to borrow very cheaply in future if necessary.
Issuing new equity might be a financial engineering experiment. No other mag7 has tried it. Plus they got BH name on the plate.
https://www.sec.gov/ix?doc=/Archives/edgar/data/0001652044/0...
I guess they don't want to burn it down to $40B?
Literally nobody.
Semiconductor/ Big Oil/ Rail/ Telco have.
I can invest perfectly in an always up market.
2008 wasn't a serious downturn?
Even if Alphabet has $80B sitting in the bank, they could quite reasonably arrive at a comparable decision.
The market thinks Alphabet is most able to efficiently turn $80B into more money by investing in AI infrastructure.
So, Alphabet is happy to oblige them, given the favorable terms.
Every company from megacorps to small fish are spending well in excess of profits on these capex expansions. No ROI timelines yet established....
It is odd that they cite customer demand just after people leave Google for DuckDuckGo due to AI enshittification.
… but as you say, idiots are lining up.
You’ll probably find this is extremely limited to whatever circle you find yourself in
People are going to line up for all of them. Hype sells these days.
It's insightful to put such documents into Claude and see how they use many different financial mechanisms to raise the money. $15B sold directly to the big banks, $40B sold to the market (but also facilitated by these banks), a direct investment (PIPE) from Berkshire. Pretty cool how financial markets do these things.