The deal brings in Warren Buffett’s diversified holding company as a major new investor, adding a high-profile endorsement of Alphabet’s long-term AI and cloud strategy.
Alphabet raised its annual capital spending forecast by US$5 billion to between US$180 billion and US$190 billion in April, ramping up investments to capture growing AI-driven computing demand with its business AI tools and custom chips.
The Google parent will sell US$10 billion worth of shares to Berkshire in a private placement, comprising US$5 billion in Class A common stock at US$351.81 per share and US$5 billion in Class C capital stock for US$348.20 per share, both below Monday’s closing prices.
The company’s shares were down 2 percent after the bell.
“All companies are thrilled when Berkshire takes positions, because it is the kind of shareholder that companies like to have,” said Steven Check, president and chief investment officer of Check Capital Management, which has investments in Berkshire stock.
Berkshire’s investment adds to the position it has built since third quarter last year. Last month, Berkshire said it more than tripled its stake in the Google parent, which at US$16.6 billion has become one of its largest common stock investments.
“This additional purchase underscores that Greg Abel(Berkshire CEO) believes that Alphabet will earn a reasonable return on its AI capex spending even with the firm issuing additional shares,” said Bill Stone, chief investment officer at Glenview Trust Company.
Alphabet said it aims to raise US$30 billion through concurrent public offerings backed by investment banks, split evenly between depositary shares tied to mandatory convertible preferred stock and Class A and C shares.
In addition, the company expects to launch a US$40 billion at-the-market offering program in the third quarter, giving it flexibility to sell Class A and Class C stock gradually over time.
“The company is experiencing strong demand for its AI solutions and services from enterprises and consumers, at levels that are exceeding the company’s available supply,” Alphabet said.
Alphabet has raised more than US$85 billion in debt across six currencies and markets over the last year, bringing its total debt balance to over US$100 billion, the company said. (Reuters)
