Why $80 Billion is Crucial for Alphabet's AI

**SPEAKER_1** (0:00)
If you want to get access to this episode and my next 30 episodes all ad-free so there'll be no ads on them, go check out my podcast AI Chat. You can go search for that on Spotify or Apple. It's AI Chat. I'm going to post all of these news episodes, and I'm also posting interviews like I just interviewed the CEO of Cohere, they've raised over a billion dollars for their AI model talking about what they're going to be spending the money on and the direction of the AI industry along with all of this new stuff. So if you want to go check it out with no ads for free, it is AI Chat. Alphabet, the owner of Google, is trying to raise $80 billion in a stock sale. $10 billion of that is going to come from Berkshire, which is pretty crazy, and all of this is to fund their AI build out. At the same time, Trump is signing a narrower AI executive order. He got a lot of pushback from the AI industry and has adjusted. I'll talk about the pros and cons of that. GitHub's co-pilot's new usage-based pricing is burning through people's entire monthly budgets in a single day. Opal is pivoting to AI hardware. They received $40 million from OpenAI. They're now valued at $275 million. And Uber is capping their employees' AI spending at $1,500 per tool after they burnt through the entire annual budget in under four months. If you want to get all of these news stories straight into your email inbox every day, I have a newsletter you can subscribe to on the Subscribe tab of aichatdaily.com. I was just looking at it, guys. I have a 40% open rate on a daily AI newsletter. Meaning if I sent out 10 emails, 40% of people are going to open every single one for something with thousands of subscribers. I'm super impressed. It is built for people that are actually shipping stuff. I can see the emails of the people that subscribe to it. So I have people from Google, OpenAI, Meta, Databricks, Microsoft, Amazon, Techstars, CopyAI, 11 Labs, Tiktok, Cisco, Google DeepMind and tons of other incredible places that all read this newsletter. So if you want to get everything that's happening with AI, go check out aichatdaily.com/newsletter.
The link in the description or it's the big subscribe button on the top right hand corner of aichatdaily.com. The first story is that Alphabet is raising $80 billion through stock sales. The big anchor on this wholesale is that they're getting $10 billion from Berkshire Hathaway. More on that in a second. What's going on right now is that the AI infrastructure spending of Google and Alphabet, the owner of Google, has absolutely exploded to $80 to $190 billion this year. And the problem is that that's actually outpacing operating cash flow. So it's basically forcing them to tap into equity and debt markets as the entire hyperscaler cohort, all of the other competitors like Amazon and Microsoft and everyone else are all collectively moving towards $1 trillion in AI spending by 2027, which is wild. This raise in particular includes about $30 billion in underwritten offerings, $15 billion in mandatory convertible preferred stock and a $40 billion at the market program launching in Q3. So Berkshire Hathaway's position has you know, they're putting in $10 billion now, but their position has been growing. This isn't like a new thing for them. They only had about $4.3 billion in November and they're up to almost $20 billion now. This is one of Berkshire's largest tech holdings after Apple, Alphabet, Microsoft, Meta, Amazon combined. They're all tracking towards the $700 billion in CapEx this year. And I think Wall Street is saying that there's going to be about a trillion dollars, like I mentioned by 2027 Alphabet just admitted basically that Wall Street already knows something. The hyperscalers can't self-fund all of these AI build-outs that they're trying to do. So Berkshire's $10 billion vote of confidence, I think, is a pretty important thing.
If nothing other than a signal that they're like, look, they make smart investments, they believe Google's going to be able to pay it back. I think you can expect Microsoft, Meta and Amazon to follow in their own kind of mega raises. It's interesting, we're all used to seeing Anthropic and OpenAI do these huge raises, but it's like Google's having to go out and get more money too, because it's just so expensive, but it's incredibly valuable to build these out. We see even XAI and SpaceX, with their massive data center build out that they used for training Grok, they could go and turn around, even if the Grok usage wasn't insane, they turn around and they can sell that back to Anthropic for $1.5 billion a month. There's a lot of money to be made in these data centers and in buying all of these chips.