💼 Alphabet's $85B Equity Raise and the CAPEX Dilemma - 2026.06.09

Hey there. It's Peanut from Bultagi.com. I wonder if everyone's portfolios survived the night safely. As of the June 9 close, Alphabet's stock price recorded $362, finishing slightly up. The market is heated up day after day with the AI theme and the dominance of big tech, but we need to look at the fundamental numbers a bit more coldly and dryly. Let's evaluate the value objectively rather than getting swept up in the mood.

💼 Fundamental Check: Numbers Don't Lie, But

Currently, Alphabet's Trailing P/E is around 28.11x, and the Forward P/E is being discussed between 25x and 26.11x ^[5] ^[2]. This does offer a relatively cheap valuation appeal when compared to the market average of 27.66x or Microsoft ^[2]. It does catch the eye that a heavyweight investor like Ken Fisher holds Alphabet near the top of his portfolio and achieved a 121% return over the past year ^[2].

If we tear into the growth metrics, they are certainly not bad. As of May, the Gemini app's monthly active users (MAU) jumped to double that of the same period last year, reaching 900 million, and it was announced that paid subscriptions also surpassed 350 million ^[4]. The AI Overviews feature is serving 2.5 billion users monthly, and they are processing 3.2 quadrillion tokens monthly across the platform, which is overwhelming in scale ^[4].

Earnings are also backing this up. Q1 Search revenue recorded $60.4 billion, a 19% increase, and the Cloud sector, in particular, showed an explosive growth of 63%, surpassing $460 billion in backlog ^[1]. On top of this, they recently unveiled a new real-time translation audio model, 'Gemini 3.5 Live Translate', actively responding to the market's AI demand. Google Cloud has established itself as a platform covering everything from startups to large enterprises, and offering Claude models through a partnership with Anthropic is also receiving positive evaluations ^[5].

Looking purely at the surface-level metrics and market evaluations, it looks perfect, but will they really just walk down a path of roses like this?

⚠️ The $85B Bill: The CAPEX Trap

What catches the market's attention the strongest is undoubtedly the massive capital raise issue amounting to $80 billion to $85 billion ^[3] ^[1]. In this secondary offering deal managed by Goldman Sachs, Warren Buffett's Berkshire Hathaway (led by Greg Abel) snapped up $10 billion worth at once, achieving a massive success at the box office ^[3] ^[2]. Jim Cramer also evaluated this as an outstanding success with much more demand than expected ^[3].

But we need to pause and think here. A company that was shouting shareholder return by buying back $45 billion in stock last year and $15 billion in Q1 alone ^[3], suddenly pouring such a massive volume of shares into the market? Explaining that computing infrastructure investment is essential to meet unprecedented customer AI demand, the company raised its CAPEX forecast for this year once again from the previous $175B-$185B to the $180B-$190B level ^[2].

We even hear news that they signed a $30 billion computing power contract with SpaceX to expand cloud services, and Google agreed to pay SpaceX $920 million monthly ^[6]. Seeing talks that Meta is also considering an equity raise of tens of billions of dollars to secure AI infrastructure funding ^[7], it feels like the capital expenditure competition among big tech has reached an extreme.

Will this massive infrastructure investment really return as meaningful cash flow and profit in the short term? Can it be clearly verified that this spending is being controlled at a level that doesn't destroy shareholder value?

📉 Bearish Scenario in a Bull Market: A Candidate for Profit-Taking Trimming?

Market optimists present Alphabet's average price target at $430 ^[4], or even argue it could reach $600 by applying a 40x Forward P/E multiple based on strong cloud momentum ^[5].

However, from the perspective of an investor considering a short-to-mid swing, concerns about the increase in the number of shares and dilution of shareholder value due to a massive equity raise are fundamental risks that must be addressed ^[1]. The fact that a company generating $174 billion in operating cash flow specifically chose massive equity financing is also evidence that the future AI investment costs could be beyond what we imagine ^[1].

What if the speed of AI adoption by enterprises is slower than expected, or if Gemini subscription models and cloud revenue growth fail to offset the unprecedented level of CAPEX spending? The P/E ratio that currently looks cheap at the 25x level risks suddenly turning into a typical value trap where the valuation cannot be justified.

Peanut views that while current solid search revenue defensibility and explosive cloud growth will support the downside, the risk of free cash flow (FCF) impairment and margin pressure due to massive capital expenditures definitely requires vigilance. Rather than unconditional full-buying or optimism, it's a time worth considering it as a candidate for profit-taking trimming, flexibly adjusting its weight in the portfolio while strictly checking the actual speed of AI monetization against costs every quarter.