Alphabet’s $84.75bn AI funding plan draws parallels to Strategy Inc’s Bitcoin playbook
Critics note the instruments are not novel, citing historical precedents, while Strategy Inc faces headwinds from unrealised losses on its crypto holdings.
Alphabet Inc has proposed an $84.75 billion capital raise, marking the largest funding initiative in the company’s public history. The funds are designated to expand artificial intelligence infrastructure and global compute capabilities, reflecting the intensifying capital demands of the current technology sector. The structure comprises a $40 billion at-the-market offering and $15 billion in convertible preferred stock, with the share sale scheduled to commence in the third quarter of 2026.
Strategy Inc chief executive Phong Le highlighted the financial mechanics of the deal, noting that the instruments employed were popularised by his firm for Bitcoin acquisitions. In a statement on the social media platform X, Le drew a parallel between the two asset classes, describing artificial intelligence and Bitcoin as the "digital rails of the future." He pointed out that the financing tools utilised by the technology giant were previously deployed by Strategy to acquire digital assets.
Convertible preferred stock functions as a hybrid security, offering fixed dividend payments while providing investors with the option to convert their holdings into a predetermined number of common shares. Strategy Inc’s convertible perpetual preferred stock, known as STRK, pays an 8% annual dividend and is convertible into 0.1 shares of its common stock. The company has branded these offerings as "Digital Credit," positioning them as high-yield, lower-volatility income instruments used to purchase additional Bitcoin.
The at-the-market offering allows Alphabet to raise capital by incrementally selling new shares directly into the secondary trading market. This approach was part of an initial announcement that also included $30 billion in underwritten common shares and convertible preferred stock, alongside a $10 billion investment from Berkshire Hathaway. The total amount raised has been corrected from an initial report of $80 billion to $84.75 billion.
Not all market observers view the strategy as innovative. Critics on X argued that convertible preferred stock is an established financial tool, citing Microsoft Corp’s issuance of $1 billion in such shares in 1996, which were later converted into common shares in 1999. Skeptics suggested the novelty lies not in the instruments themselves, but in their application to assets without immediate incoming cashflows.
Meanwhile, Strategy Inc faces its own market challenges. The company has experienced a sharp decline in its stock price following the report of its Bitcoin holdings sales. It is currently dealing with unrealised losses, as the price of Bitcoin has fallen below the average acquisition cost of its holdings, underscoring the volatility inherent in the firm’s core strategy.
