Alphabet is seeking fresh capital as stock's 4-week losing streak tests investor appetite

Alphabet CEO Sundar Pichai during the Bloomberg Tech conference in San Francisco, June 4, 2025.

David Paul Morris | Bloomberg | Getty Images

A month ago, Alphabet briefly surpassed Nvidia by market cap. The stock has since been on a downward slide, and is on pace to wrap its fourth straight weekly drop, the longest losing streak in more than a year.

That's the market mood Alphabet faces as it pursues $85 billion in fresh capital to help fund its artificial intelligence build-out. While Google has been Wall Street's favorite megacap tech name over the past year, some skepticism is seeping into the story as the cash-rich company seeks even more money for infrastructure and to advance AI models that it hopes will compete with offerings from Anthropic and OpenAI.

"I never thought Google would need to hit the public markets to raise money to fund their spending," Dan Niles, founder of Niles Investment Management, said in an interview.

Niles said Alphabet has "the best stack in all of AI" at scale, citing its models, tensor processing units, or TPUs, Android distribution, cloud business and search dominance. That strength, he contended, is what makes the equity raise so striking.

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Like its hyperscaler peers, Google is spending historic sums of cash on new data centers and the chips and systems needed to satisfy soaring demand for AI compute. In April, the company upped its guidance for capital expenditures for the year to as high as $190 billion from $185 billion.

Before announcing on Monday that it would raise $80 billion in equity sales, including a $10 billion investment from Berkshire Hathaway, and then boosting that number to $85 billion on Wednesday, Google had already secured more than $55 billion in fresh debt since November. Melius Research estimates Google's free cash flow will turn negative for the next few years as AI capex ramps.

Until very recently, investors were fully onboard. Alphabet shares are up more than 120% in the past year, even after the four-week pullback, and reached a record in mid-May. But an underwhelming showing at Google I/O last month and concerns that the company has fallen dangerously far behind in AI coding models contributed to the latest sell-off.

Alphabet vs. Nasdaq over past month

There's another big reason for Alphabet to rush to the equity market: IPOs.

SpaceX is heading toward the Nasdaq next week and is aiming to raise a record $75 billion in its initial share sale. Anthropic has confidentially filed for an initial public offering, and OpenAI is expected to do so soon. The largest IPO in history to date was Alibaba's $21.8 billion raise in 2014. Each of the three mega offerings on the horizon will likely bring in several multiples of that.

Alphabet could be looking to tap capital markets now to secure its balance sheet before investors are asked to commit hefty amounts of cash to new AI offerings. Niles said capital isn't infinite, despite how much of it has poured into the AI trade.

Alphabet is presenting the raise as a way to preserve financial flexibility while it accelerates spending. Executives have been telling investors that strong access to global debt and equity markets is becoming a strategic advantage given the scale of AI demand.

'Unique opportunity'

CEO Sundar Pichai said in an investor presentation that demand from enterprises and consumers is "meaningfully exceeding" Alphabet's available supply, calling it "a clear indicator of Alphabet's unique opportunity."

"Supporting all of this at scale for our users, while also serving enterprises and developers around the world, requires massive compute investments," Pichai said.

After Alphabet's capex more than doubles this year, Pichai said he expects it to "significantly increase" again in 2027, with the overwhelming majority going toward technical infrastructure.

CFO Anat Ashkenazi called the equity offering "a strategic proactive move to optimize our financial flexibility and maximize long-term shareholder value creation."

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Alphabet's pitch is that the spending is already showing up in the business, especially in cloud.

Google Cloud revenue increased 63% year over year in the first quarter to a record $20 billion, while backlog nearly doubled sequentially to more than $460 billion. Ashkenazi said AI solutions are now the largest contributor to cloud growth for the first time, and that 75% of cloud customers are using Alphabet's AI products.

The company is also trying to prove that its scale makes each new dollar of AI infrastructure more valuable than it would be for rivals.

Alphabet said it has reduced Gemini serving costs by 78% since 2025, and Ashkenazi said hardware and engineering improvements have cut the cost of core AI responses by more than 30% since the launch of Gemini 3. Those efficiency gains are critical at a time when companies continue to boost spending on inference, model training and AI coding.

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Meanwhile, the company's AI products are gaining popularity. Pichai said in the presentation that AI Overviews now counts more than 2.5 billion monthly users, while AI Mode has surpassed 1 billion monthly users a year after launch.

Analysts at HSBC said in a report that further capital raises are likely across the hyperscaler landscape, as all the big players try to keep pace with demand and avoid falling behind their rivals.

Goldman Sachs CEO David Solomon, whose firm is involved in the Alphabet transaction, suggested that the equity offering will be a test of sorts for the market, calling it the "first actual concrete data point" for these massive AI share sales.

He warned that, while there's plenty of money across the globe to fund the current level of financing, sentiment can turn quickly, especially given the unprecedented amount of capital being raised.

"We are definitely in a moment where there's more greed than there is fear," Solomon told CNBC's Leslie Picker this week in an interview at the Economic Club of New York. "When capital's available, if you're capital consumptive and it's available, take the capital."

— CNBC's Jennifer Elias contributed to this report.

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