Nathaniel Whittemore

This will be the first time that Google has issued new stock in more than two decades, meaning that they will be one of the first hyperscalers to force investors to stomach stock dilution in order to continue their CapEx spend.

In the press release, Google confirmed that they plan to spend $190 billion this year and anticipate a significant increase for 2027.

Now

Over the past year, we've seen a transition as hyperscalers move from spending cash on hand, i.e.

ending buybacks and diverting profits into the infrastructure build-out, to start to begin to tap the debt markets, with both Google and Meta issuing corporate bonds in record numbers last year, to now moving into this equity phase.

Now, at this point, Google still has plenty of borrowing capacity, but they presumably want to take advantage of recent increases in their stock price.

Their stock is up 18% year-to-date, with most of the gains coming in the past two months.

Sources said that executives see a protracted period of AI investment and want to diversify funding sources while keeping balance sheet flexibility.

The market, for their part, seemed pretty ambivalent about the news, with Google falling then recovering to basically flat and overnight markets.

One market participant that was enthusiastic about the plans was Berkshire Hathaway, who signed up for a $10 billion allocation from the new issuance.

Warren Buffett has been notoriously slow on tech, failing to make any meaningful allocation until purchasing Apple stock in 2016, but this tranche of Google stock would take Berkshire's holdings to $32 billion.

That would make Google a top five holding, representing around a tenth of their portfolio.

Sources said that the deal was hashed out over a 24-hour period and will be the largest bet so far from new CEO Greg Abel after he took over from Buffett in January.

Now, while most of the market may so far be in wait-and-see mode when it comes to this Google deal, the AI trade overall is heading into overdrive.

According to the Wall Street Journal, the S&P 500 has just delivered one of the strongest two-month stretches in modern history.

The index is up 16% since the beginning of April, which is the fifth strongest two-month run since the 1950s.

Now, this moment of strength is not like many of the previous recoveries coming out of a market crash, but instead is almost entirely about semiconductors going on an absolute tear.

The US Semiconductor Index is on pace for its strongest quarter in history, gaining 69% over the first two months of the quarter.

Unsurprisingly, this has resurfaced the bubble question.

Skeptics point out that semiconductors are notoriously cyclical, but others, like Citrini Research, point to structural shortages in the entire AI supply chain as reasons for people to be less skeptical of this rally than they might otherwise be.