Alphabet’s $80 Billion Flex

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium, Lou Whiteman, and Tyler Crowe discuss:

• Alphabet’s $80 billion flex.
• AI supplier whack-a-mole.
• Bitcoin’s Michael Saylor problem.

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A full transcript is below.

This podcast was recorded on June 3, 2026.

Travis Hoium: 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. 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 going to come from Berkshire Hathaway. But as neoclouds and Oracle and even some of the other hyperscalers are taking on more and more debt to fund this AI build-out, 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. Tyler, Alphabet said, Hey, we want to sell equity, not debt. This is just an interesting move from them.

Lou Whiteman: 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 all, 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, like, necessarily beat somebody more so than the other. The first thing is the bottom line first. I think this is really the case when it comes to this deal with Google raising $80 billion, just some rough numbers. I think their current capex is somewhere in, like, $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. 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 that. They're obviously probably not going to go $80 billion over in a single year. This is probably like, let's get a little bit of a cash cushion and 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. They've got things like that big Anthropic deal that they signed last year. There is demand for what they want to build.

Travis Hoium: Yeah, when we look at some of these deals, I mean, Anthropic just raised $65 billion. They're selling several percentages of their company, 6, 7% of the company to raise that money, Lou. This is 2% of Alphabet. 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. Is this the 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: Yeah. Now, Tyler, first of all, two things can be true. This can both be that they need money, and they are smiling and waving at SpaceX as they prepare for an IPO.

Travis Hoium: Yeah, this did come before the SpaceX IPO before we heard hours afterwards that Anthropic [OVERLAPPING]

Lou Whiteman: It's hours afterwards. It's basically the same amount. I mean, part of it 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 start-ups. Why not get your story out there? I think Tyler said it right. Very little dilution. This is the time where you do use equity when your stock is highly valued. To raise money this way, I think makes sense. Travis, you hit on, I think maybe the most interesting thing about this even, I think, among the best of these companies, even the cash generation machine, last year's bull story is now over. 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. That's over. The good news is that these are massive well-capitalized companies that have a lot of options. 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, that this is really expensive. Strike while it's up.

Travis Hoium: All right, pop quiz, out of the hyperscalers that are spending hundreds of billions of dollars on this AI build-out in the neoclouds, what is the one other company that has a net cash balance? Do you guys know? It is Microsoft. It's only. The only other one of these companies, Amazon, net debt of about $67 billion. Then obviously all the neoclouds, Nebius, CoreWeave, Iren, they're all, Oracle, a ton of debt. Debt is really fueling most of this. This is going to put Alphabet in a very different position. Tyler, what does this say about the return on investment that they're potentially seeing? This is one of the things I think we're kind trying to draw conclusions that are hard to draw today because you look at the GCP numbers within Google Cloud, those are phenomenal. But the $180 billion that you mentioned that they're spending this year to do this AI build-out, very little of that is actually contributing revenue today. It's going to be next year, the year after if token prices start to come down, which they've actually gone up recently, the economics could change. What does this at least indicate about what they're seeing about the ROI for the business?

Tyler Crowe: I feel like that's a great question. I don't have a great answer too. I'm throwing out into the wind here but that's the case with all of AI, where we can see that some tangible benefits. I mean, here in the at Motley Fool, using Claude and ChatGPT and several other products, much more prominently in our everyday workflows. We see, like, the use cases. However, the economics of what those businesses are doing is a little bit questionable. For the hyperscalers, one thing that you can at least rely on to a certain degree is companies like Anthropic are pledging large amounts of money to them for renting this stuff. Just to use the SpaceX example that you were mentioning earlier as part of the S-1 for SpaceX, that deal actually said that Anthropic is going to pay them, I think, it's $1.25 billion a month for computer power. It shows like there is a monetizable way of doing this, and it's not just, Hey, we don't really know what it's going to work with. There are actually, like revenue numbers you can put behind the compute. Similar to that, the Anthropic deal that they signed was something like $200 billion worth of compute power over the next five years.

Travis Hoium: But I want to push you on that. You and I have both been following energy for a very long time. If you go back to one of the massive growth stories of the 2010, it was the solar industry, solar installations exploded. There were companies that were supply-constrained, manufacturers that were supply-constrained of silicon. They needed to get silicon. How do you do that? You sign a long-term contract with these suppliers to get silicon. The problem was, for these companies, they signed a contract for four or five years to get this silicon at a certain price, and then the price collapsed. Suddenly, you have a contract for, I don't know, let's say, $100 a pound. I'm making up these numbers here. But the spot price is $5 a pound. Suddenly, you're losing your shirt. This is what I really struggle with is: What are the long-term economics? Because, yes, that Anthropic deal is great for Google because they have contract in. We could go with CoreWeave or Iren or any of these companies. But eventually, the economics doesn't work for somebody, and we don't know exactly who that's going to be. Does that ring a bell to you, Tyler? We haven't gone through some of this with that and you could go to the drilling companies, I energy, this kind happens over and over again.

Tyler Crowe: I almost feel like we might be stepping on some stuff we're going to talk about later on this, but it is this idea of, like, what we're doing at the current pace doesn't necessarily like work. There's some incongruencies here. To that point, like, yes, we could see compute power costs go way down for reasons XYZ. But there's also, like, the possibility of algorithm efficiencies. Right now, all of these companies are incented to put out the best product and compute power be damned. Eventually, it's going to come down to, like, a cost per token, efficiency from the actual computing that you're doing with these algorithms that will incent these companies to be within the range or try to bring down their cost commensurate with what they're going to see with compute power.

Lou Whiteman: To your point, though, I would love to see the contracts because it could be the other way, too. Like how rock solid is this future revenue? What are the escape clauses? Yeah, but it does feel like there's a tension there. Here's what I'll say, though, and this is the silver lining. I'm confused by ROI. I don't see it. But having Berkshire along for the ride is a pretty good signaling tool, whether it's right or not. Maybe Greg Abel, his legacy will be. He's just a LOL day trader, nothing matters, and he's just jumping in on a momentum deal. But I doubt it. Berkshire, with its good housekeeping seal of approval, seeing a path to value here, seeing something there. As things go and especially as everyone's competing, as I said at the top, that's a pretty good endorsement. I mean, maybe if Berkshire sees the reason to believe we should, too.

Travis Hoium: When we come back, we're going to get to the supplier Whac-A-Mole. Who are these companies paying for all of this compute? Why are Dell and HP two of the hottest names on the market? You're listening to Motley Fool Hidden Gems Investing.

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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. What's been crazy this year is how much we have gone from supply-constrained environment to supply-constrained environment. All these companies have explosive growth. The next growth story, apparently, Tyler, is these old companies that have been around forever, Dell and HP Enterprise. They are on fire right now. But when you look in the growth and valuation of these companies, what excites you about this segment of that supplier space? Because it seems like, memory was hot. Now, it's just going up and down again.

Tyler Crowe: Yeah, to me, this is a little like, this isn't just the tide that raises all boats. This is the tsunami that is bringing everyone 30 feet up higher than they thought they were going to go. It's not a bubble. Tsunami.

Travis Hoium: I like that.

Tyler Crowe: Yeah, just think about again, we're talking about Alphabet spending $180 to $200 billion this year. If we're going to take the over or under of how many revisions up we're going to see on their capex, it's going up. 2027, it's going up. They're raising more money to go higher. All of them are going higher. Meta is doing weird off-balance-sheet stuff, so they can go higher. It's not I almost is to the point where it's not like we need to get the best equipment to make this happen. It's like, grab every spare part you can and slap it together and get some compute power available. I’m sure that a lot of these, like Neoclouds and some of these, fly-by-night operations are just grabbing whatever they can to make some profit or make some return, supplying this compute, which does appear to be constrained. Anthropic has said for a while that they are supply-constrained when it comes to compute. ChatGPT, not quite sure there because they spent loads of money before that for the compute.

To me, this is not necessarily a case of, oh, yeah, these companies are all doing awesome. I just I think it points to the desperation that all these companies are going towards to make sure that they have enough equipment in the ground when these contracts are supposed to come due. I don't know if I'm necessarily excited by that, because this is think of it almost like a post-hurricane. I know I just use tsunami, but that time where, like, supplies are so constrained that prices go up infinitely, and whatever you can get your hands on is effective. That's what this feels like. You don't see some discernment of like, Oh, Nvidia has got the better stuff, we're just going to use Nvidia. It's like, No, we'll take some low end process or just as long as it will actually compute something.

Travis Hoium: Yeah, Lou, I think to go to our ROI point for Alphabet, this is what makes this all so confusing because if you look at their revision last quarter, they revised their capex number a little bit higher, but they basically said, Hey, we're not going to get any more compute. We're just getting less compute for more money. That's flowing down to some of these suppliers, but you would think eventually, eventually is doing a lot of work there, but eventually, there is some supply demand balance, and the commodity companies become commodity companies again, which can be a really good business, but it doesn't necessarily mean they're going to be rocket stocks like they are today.

Lou Whiteman: Yeah, and it tends to be the longer we go through these cycles, the more our attention span goes quickly. We'll see how sustainable these are, no one's talked about Micron anymore because of HP Enterprise it feels like. But what we're all dancing around. I think, because it's hard. I don't think any of us know the answer here, but there is just this weird tension. Where all of these stocks are based on projections that hyperscalar spending will continue basically through the end of the decade. With Micron, it was through 2029, the order book is filled. At the same time, corporate America is starting to talk about measuring ROI on AI instead of just throwing as much of it at the wall to see what sticks and put it in your conference call. If both of those things are true, then how are the hyperscalars holding up so well? How can everybody win here? Things are going to be massively expensive. Pricing power may not or there's pushback on pricing power improving, and yet the ones both spending the money and providing the service are winners here. It feels like not all of those things can be true, and I don't think any of us know which part breaks or, how the maths resolve here?

Travis Hoium: Yeah, I signed an interview with an IBM executive this week and he was making the argument that this is not a bubble because there's so much demand and then went on to explain that, if there's 10 or 15 suppliers, well, not all those suppliers are going to survive. It's just going to be two or three that are going to survive. I was thinking, that's exactly what a bubble is.

Lou Whiteman: But well, here's the other part, though. It is not over by a long time. I don't want to name the company because I don't want to start this, but I just got a research note yesterday from an about an auto parts company, where the analyst is basically projecting revenue to, I think, like a 20% Kager as soon as the market realizes that you can retrofit their parts into gas turbines for data centers. I'm not predicting that's what's going to happen, that doesn't imply to me that we are getting out of silly season anytime soon. Yeah, shows the level of [inaudible].

Tyler Crowe: To that one, as well. Just in the wild stories of all of a sudden becoming AI compute supplies. There's a jet engine servicing company that owns some turbines that they also lease out to planes, and like, Hey, we can start leasing these out to AI data centers. We can make way more money. It's just like it's all coming out of the woodwork now in the weirdest of places.

Travis Hoium: Well, it's a good time to be a supplier of anything in AI today. When we come back, we're going to change directions here a little bit and talk about the future of Bitcoin. You're listening to Motley Fool Hidden Gems Investing.

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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. Every four years, Bitcoin drops like a rock. Last time it did was 2022. Right on Q, it's falling, but this time, it's MicroStrategy that is causing some of the consternation Michael Saylor Firm who, has really made his name, being the loudest Bitcoin bull in the room, they have deployed a strategy called Bitcoin Yield. That involves selling debt and equity to buy more Bitcoin as long as your net asset value of your equity is higher than the value of the Bitcoin that each share holds, that works. But, Lou, this is starting to come undone. That premium has started to come down. They have to pay down debt and dividends and things like that. Now, they're actually selling some Bitcoin. Don't call it a Ponzi scheme over for them?

Lou Whiteman: First of all, that four years thing. Come on. Carl Jung called. Like, we do not have enough. That is a coincidence until we see seven or eight more patterns, but yeah, it's happening. Look, Saylor’s plan reminds me of a lot of options strategies. It works as long as the underlying asset you’re looking at only goes in one direction, and the second it doesn’t, figure out why isn’t everyone doing this, too. Oh, this is why not everyone is doing this? This thing to me here is Saylor, if only he hadn't gone full-on evangelist, because if they would have been willing to manage this at the first sign of cracks, they could have unwound this orderly. But no, he is the evangelist for Bitcoin. Therefore, he will never sell. He is going to be the hands that never sell. He kicked the can, and now he's paying the toll for that. I don't know what this means for Bitcoin. I think it's important to separate Michael Saylor from Bitcoin. But I will say that if I was interested in Bitcoin, I would definitely be waiting for this to play out. We don't want to catch this falling knife simply because we don't know how many things are going to break if and when this strategy unwinds.

Travis Hoium: Tyler, what analogies are there to this business model that they've instituted that may or may not work in real corporate finance?

Tyler Crowe: I think it depends on how generous you are with your interpretation of what this is. If I was being most generous, to Lou’s point, if you're not an evangelical and you're just, like, managing an asset, you could almost, like, draw the line of this being like a mortgage thing where you basically, like, buy and sell mortgages, you issue equity and debt when your price is higher than your net asset values. Then when you're trading at a discount to that, you sell down some of your net assets.

Travis Hoium: Basically, you have to be willing to sell under those conditions.

Tyler Crowe: It's playing both assets to what is at a premium at any given moment. It happens in other industries. It happens a lot in the finance industry. It happens in real estate. Happens in commodities trading all the time. Trading one asset based on value or discount to the other. That works. Unless to Lou’s point, you're an evangelical who says, I'm never going to sell this because you say Bitcoin yield, but Bitcoin doesn't yield anything. The price goes up, the price goes down. You're going to have to pay cash somewhere, and that's going to either come from issuing equity or selling your position. That's where it gets really complicated here, because unless they're actually willing to be like, ‘Yeah, we're just asset manager, basically,’ it would make sense. I think is making it so challenging is it's not just like selling equity or buying down equity. You start adding in debt, you start adding in dividends. It becomes a little bit more complicated.

Right now, I wouldn't say that MicroStrategy is in, like, some huge distress here. I think they still traded a little bit of a premium to net asset value, at least, This is according to their website. How trustworthy that is, I don't know. That's not like something you have to report, and the SEC is going to tsk-tsk you if you're not doing it completely right, as of right now, it doesn't look like it's a massive panic moment, but considering the trend that they've seen in the, net asset value to their valuation, it would make sense to use that premium price or whatever to shore up the balance sheet at this point. Again, this is being generous and not thinking that this is the weird possibly one of the dumber things I think I've seen on Wall Street.

Lou Whiteman: Definitely, dumb in hindsight now. I think there was a case for it back in the day when a lot of people couldn't buy Bitcoin and there weren't other instruments, this was a pass-through entity. This is a way to buy Bitcoin wrapped in equities envelope kind of. Those days have changed, and if there was a case to be made for it, then that case is now gone. Yeah, Tyler said, this is a very simple game. If your Bitcoin that you hold is worth less than your stock, you do one thing. If it's worth more than your stock, you do the other. You have to be willing to do both of it. Worst case is they liquidate, which isn't great for the people on the payroll there, but there should be a there. The issue is, though, if they do get serious about this and have to start liquidating, Bitcoin's already down, how much further can it go? That's why, again, I just even if you're interested in it, stay I think extreme caution for now while this plays out.

Travis Hoium: Leverage complicates everything, especially when you're buying an asset that you're expecting to either have an ROI or appreciate it in the future. Maybe to bring things full circle Alphabet, has it right? They're taking the low-risk approach.

As always, people on the program, they have interest in the stocks they talk about in The Motley Fool and they have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows The Motley Fool's editorial standards, and it's not approved by advertisers. Advertisements are sponsored content provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Lou Whiteman, Tyler Crowe, and Dan Boyd behind the glass, I'm Travis Hoium. Thanks for listening. We'll see you here tomorrow.

Lou Whiteman has positions in Berkshire Hathaway. Travis Hoium has positions in Alphabet and Berkshire Hathaway. Tyler Crowe has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Amazon, Berkshire Hathaway, Bitcoin, Hewlett Packard Enterprise, Meta Platforms, Micron Technology, Microsoft, and Oracle. The Motley Fool has a disclosure policy.