Alphabet’s $80 Billion Flex

**Travis Hoium** (0:02)
Why does one of the most profitable companies in the world need more money? Motley Fool Hidden Gems Investing starts now.
Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium joined today by Lou Whiteman and Tyler Crowe. And guys, one of the stranger news announcements this week was that Alphabet announced that they are raising another $80 billion. What got attention was that 10 billion of that is gonna come from Berkshire Hathaway. But as Neo Clouds and Oracle and even some of the other hyperscalers are taking on more and more debt to fund this AI buildout, which is now moving past the operating cash that they're generating from their business, even Alphabet might pass that in 2026, they need more money. And Tyler Alphabet said, hey, we want to sell equity, not debt. So this is just kind of an interesting move from them.

**Tyler Crowe** (0:53)
I think there's a little bit of like, we've been watching too many industry and business related television shows like Succession, we're thinking like strategy, like how can we really stick it to these other players? But let's be honest, they're just looking at the numbers and being like, we need more money. We're not trying to necessarily beat somebody more so than the other. The first thing is the bottom line first. And I think this is really the case when it comes to this deal with Google, raising $80 billion because just some rough numbers. I think their current capex is somewhere in $170 billion range for 2026
2027 is probably going to be more and they're bringing in $175 billion in operating cash over the past 12 months. So if you're going to obviously do more, you're going to go past your operating cash flow. And I think this is getting ahead of that. They're obviously probably not going to go $80 billion over in a single year. This is probably like, yeah, let's get a little bit of a cash cushion, get ahead of it. We've got a decently priced stock right now, and this will be a good time to do it. We'll get Berkshire involved.
It'll make it a little bit easier. And they've got things like that big anthropic deal that they signed last year. So there is demand for what they want to build.

**Travis Hoium** (2:06)
Yeah, when we look at some of these deals, I mean, Anthropic just raised $65 billion. They're selling several percentages of their company, six, 7% of the company to raise that kind of money, Lou.
This is 2% of Alphabet. So it's not all that dilutive. And it does keep that flexibility on the balance sheet. Like Tyler said, I mean, there is debt on the balance sheet, but they still have a net cash balance on the balance sheet. So, you know, is this the kind of thing that you like as those bills for the AI build out keep going up? Or would you rather have them use debt?

**Lou Whiteman** (2:40)
Yeah. Now, Tyler, first of all, two things can be true. Okay, this can both be that they need money and they are smiling and waving at SpaceX as they prepare for an IPO.

**Travis Hoium** (2:50)
Yeah. This did come before the SpaceX IPO, before we heard, I think, hours afterwards. Yeah.

**Lou Whiteman** (2:57)
It's basically the same amount. I mean, part of it is, is just like every other company, striking while the iron is hot, probably too, for the excitement around it. But look, I think that they have a compelling story to tell relative to those startups. So why not, you know, get your story out there?
I think Tyler said it right. With very little dilution, this is the time where you do use equity, when your stock is highly valued. And so to raise money this way, I think makes sense.
Travis, you hit on, I think, maybe the most interesting thing about this for even, I think, among the best of these companies, even the cash generation machine, last year's bull story is now over. Because last year at this time, all of this spending was justified as it's not 1999 all over again. They can fund this from operations. They can fund this from their cash. That is simply no longer the case. So that's over. The good news is, is that these are massive, well-capitalized companies that have a lot of options. So it's not like, I'm not trying to say the sky is falling. I do have questions, but I think this is the smart move is that this is really, really expensive. Strike while it's hot.

**Travis Hoium** (4:05)
All right. Pop quiz. Out of the hyperscalers that are spending hundreds of billions of dollars on this AI build out in the Neo clouds, what is the one other company that has a net cash balance?