Martin Gamble on US markets: Alphabet's record $85 billion raise

US markets were mixed in the first week of June with the technology-led Nasdaq Composite index taking a breather after a strong run and the benchmark S&P 500 flat.

A poor reception for chip maker Broadcom's latest earnings led to selling across the AI space.

Data from the Supply of Institute Management showed both the manufacturing and services side of economy expanded faster than expected May.

Worryingly for policy makers at the Federal Reserve, the prices paid component showed prices are rising at the fastest clip since 2021, which proved a good lead indicator of rising inflation in 2022.

The Bureau of Labour Statistics reported that job openings rose to their highest level since 2024 while hiring remains subdued, continuing the recent low hire, low fire trend.

Artificial intelligence firm Anthropic, owner of the Claude chatbot, filed to list its shares on the stock market, which could attract a potential market value of more than $1 trillion.

A recent funding round saw Anthropic’s private valuation reach $965 billion with the company on track to achieve an annual revenue run-rate close to $50 billion.

Rival OpenAI which runs the ChatGPT chatbot is also expected to list its shares on the stock market later this year, although it has not yet officially filed.

Ford Motor was one of the biggest fallers this week as profit taking set in after a 50% rally in in the shares over the last month.

Alphabet announces record $85 billion equity raise

Google-owner Alphabet surprised markets after announcing the largest ever capital raise, as the hyperscaler looks to diversify its funding options in the build out its AI infrastructure.

Alphabet expects capital expenditures to reach between $180 billion and $190 billion in 2026, up from $91.4 billion in 2025 and just $52.5 billion in 2024.

Increased spending has reduced cash on Alphabet’s balance sheet and continues to gobble up free cash flow.

Initially targeting $80 billion, the capital raise was upsized to $85 billion on strong investor demand. As part of the transaction Berkshire Hathaway will participate via a $10 billion private placement.

Berkshire first started buying a stake in Alphabet in the third quarter of 2025 and the latest purchase will increase its stake to around $32 billion, making Alphabet its third largest position, behind Apple and American Express.

Until now, Alphabet has financed its AI spending by issuing debt, including a £1 billion ‘century bond’ yielding 6.05%, marking the tech industry’s first 100-year bond since 1997.

Since May 2025 Alphabet has borrowed $85 billion, causing total debt on its balance sheet to expand from $28 billion to more than $100 billion.

In this context, Alphabet’s share offering looks like prudent risk-management strategy for what could be an open-ended AI race.

Broadcom disappoints despite record profits

With the shares up 63% since March, it was always going to be a tall order for chip designer Broadcom to do enough to justify investor enthusiasm going into first quarter earnings.

Results were impressive, with record profits and AI revenues more than doubling year-on-year to $8.4 billion, but the shares fell 12% as earnings only slightly beat expectations and the outlook underwhelmed.

Jefferies analysts summed it up neatly, writing: “Broadcom faces a tough bar to deliver upside every quarter, with July guidance and its reiteration of more than $100 billion in fiscal 2027 AI revenue unlikely to satisfy a market already expecting higher numbers.”

On a brighter note, Broadcom projected third quarter revenues of around $29.4 billion which was ahead of analysts’ forecasts and announced a new $10 billion share repurchase program after returning $10.9 billion to shareholders in first quarter via buybacks and dividends.

Broadcom recently announced a landmark $10 billion multi-year deal with Anthropic to access Alphabet’s custom-made AI chips, designed in partnership with Broadcom, to power Anthropic’s next generation Claude training models.

Hewlett Packard Enterprise delivers blow out earnings

AI-server maker Hewlett Packard rallied 19% on 2 June, its best-ever day after reporting its biggest earnings beat since 2018 and pulling forward financial targets by two years on strong AI infrastructure demand.

HPE reported adjusted earnings per share of $0.79 which was almost 50% ahead of the consensus estimate of $0.53 reflecting increased spending by enterprises to avoid supply risks and rising memory chip prices.

Morgan Staney analysts wrote: “customers are absorbing materially higher server prices with little evidence of demand destruction”.

The company significantly raised its fiscal 2026 revenue growth projection to a range of between 29% to 33% from 17% to 22% previously and increased its networking division’s growth outlook to 72% to 75% from 68% to 73%.

The analysts added, “Durability of demand versus peak earnings risk will be the key debate from here.”

HPE shares are up 129% year-to-date and 204% over the last 12-months compared with a 38% gain in the Nasdaq Composite index.