Five questions for AI’s biggest IPO

Alphabet plans to sell $80 billion in stock, including a $10 billion private placement to Berkshire Hathaway, to finance AI infrastructure and global compute spending as its free cash flow falls short of projected capital expenditures of up to $190 billion in 2026.

Five questions for AI’s biggest IPO And SpaceX IPO updates Trillion dollar memory companies Microsoft's upcoming BUILD event Welcome to . Cautious Optimism https://www.cautiousoptimism.news/ , a newsletter on tech, business, and power. Modestly upbeat Tuesday. In the past, a European startup exiting to an American tech giant for more than $1 billion https://www.theinformation.com/briefings/salesforce-acquires-contentful-latest-move-boost-ai would be big news. In today’s market, it’s a footnote. Why? Startups are staying private longer, allowing them to grow larger. The bar for what matters is therefore always rising. Good luck turning heads with an exit that is, what, a single AI seed round https://www.reuters.com/legal/transactional/uk-based-ai-startup-ineffable-raises-11-billion-europes-largest-seed-financing-2026-04-27/ ? Today we’re looking at Alphabet’s new financial planning, trillion-dollar memory companies, Microsoft’s post- OpenAI plans, updates from SpaceX’s IPO, and questions for Anthropic’s IPO filing, now that it has filed a confidential petition to list. To work — Alex 📈 Trending Up Climate-themed venture capital investment https://techcrunch.com/2026/06/01/zigging-when-most-are-zagging-ex-meta-cto-raises-250m-climate-fund/ … racism in politics https://www.politico.eu/article/afd-vox-mingle-with-ex-us-border-patrol-chief-white-nationalist-leader-at-remigration-summit/ … technology export rules in China https://www.bloomberg.com/news/articles/2026-06-02/china-adds-data-and-ai-to-trade-secret-rules-to-block-leaks … anti-AI GOP sentiment https://www.nbcnews.com/tech/tech-news/florida-sues-openai-sam-altman-saying-put-profit-safety-rcna347602 ? … successful cyber penetration https://www.bloomberg.com/news/articles/2026-06-02/russia-says-it-found-foreign-spyware-on-top-officials-phones?embedded-checkout=true ? … code for copper, PVC https://www.axios.com/pro/enterprise-software-deals/2026/06/01/endras-engineer-buildings-ai … the money in the data center networking game https://drivenets.com/news-and-events/press-release/drivenets-secures-410m-series-d-to-meet-surging-demand-for-ethernet-fabric-in-large-scale-ai-deployments/ … consumer spending https://www.cnbc.com/2026/06/02/victorias-secret-vsxy-earnings-q1-2026.html ? … executive turnover https://www.adweek.com/media/the-trade-desk-appoints-nate-olmstead-cfo-after-a-year-of-executive-turnover/ … chances of guillotines https://www.wsj.com/finance/stocks/the-record-divide-between-corporate-profits-and-worker-pay-ea4c75bc?st=ZmRobo …… EU membership AI compute, via Berkshire: Google intends to sell $80 billion worth of stock https://s206.q4cdn.com/479360582/files/doc news/2026/Jun/01/attachments/2026-June-Alphabet-Equity-Capital-Raise-Press-Release-PDF.pdf in a multi-part transaction to raise fresh capital to finance AI spending. The plan includes a $10 billion private placement to Berkshire Hathaway at a roughly 6% discount to Alphabet’s current share price , a $30 billion underwritten public offering, and a $40 billion at-the-market sales program starting Q3 2026 . The capital will be used for several purposes, earmarking $40 billion for “general corporate purposes, including capital expenditures to scale AI infrastructure and global compute,” $30 billion “to facilitate, for a period of time, an administrative change to how Alphabet meets tax obligations associated with vesting of employee equity awards,” and the last $10 billion left for “general corporate purposes.” The company reminds investors in a document that it projected 2026 capex between $180 billion and $190 billion, with greater investment in 2027. The issue? Alphabet’s free cash flow was $174 billion in the preceding four quarters. That means the search and cloud giant can no longer afford to finance its capex from cash flow while continuing to pay its dividend and repurchase shares. So, it’s raising capital. - Alphabet: “Google now has over 8.5 million developers building new experiences with its models monthly and its first party model APIs are processing 19 billion tokens per minute, a 6x increase year-over-year.” That Berkshire is involved — the investment group is a long-time shareholder of Alphabet — is not a shock; when you need capital, you talk to the cash-rich, and that’s Berkshire today. Famously https://www.morningstar.com/news/marketwatch/2026050426/berkshire-hathaway-is-now-sitting-on-a-record-397-billion-in-cash-and-its-not-the-only-firm-reluctant-to-invest-in-the-stock-market . Why not use debt? Stratechery reckons https://stratechery.com/2026/the-google-capital-company/ that the equity sale first implies future debt fundraising. I think that’s right; Google’s free cash flow will not scale as quickly as its capex needs, so the company is going to make the rounds with a very large and deep hat. Debt is ~cheaper than selling shares, but I reckon that at today’s rates, selling a few shares when tech stocks are at, or near, record highs is also an efficient fundraising mechanism. - Gist: The compute buildout is not slowing down. Alphabet is still incredibly bullish. OpenAI’s Sam Altman spoke to https://www.cnbc.com/2026/06/01/cnbc-exclusive-transcript-openai-ceo-sam-altman-speaks-with-cnbcs-david-faber-on-power-lunch-today.html CNBC recently at the site of his company’s nascent data center in Saline, Michigan https://www.datacenterdynamics.com/en/news/oracle-and-openai-start-construction-on-stargate-data-center-campus-in-saline-township-michigan/ . Why is he so confident in future compute demand? Here’s the man himself: “ P eople are really saying, the future of my company, the future of my scientific research program, it is going to depend on this. Can you promise me compute long into the future?” Who wouldn’t want to say yes? Trillion-dollar memory companies: Back in my day, a trillion-dollar company was an outlier https://techcrunch.com/2017/07/19/techs-5-biggest-players-now-worth-3-trillion/ . Today? There are three trillion-dollar memory companies. Micron recently crossed the $1 trillion threshold alongside SK hynix , while the more diversified Samsung is worth around $1.5 trillion. What’s causing market hype for the memory-havers? Everyone wants their product, and there isn’t enough of it. Here’s a line from Micron’s now somewhat dated most recent earnings report https://investors.micron.com/static-files/e089f8c0-065d-47b8-9d02-bfa863cdb357 : Micron set new records across revenue, gross margin, EPS, and free cash flow in fiscal Q2, driven by a strong demand environment, tight industry supply, and our strong execution, and we expect significant records again in fiscal Q3 Even more, Micron said that it is forging “strategic customer agreements” that include “specific commitments over a multi-year time horizon for improved visibility and stability in our business model.” Incredible demand, and a break from the historical memory boom/bust cycle? Up go the valuations Microsoft’s AI aspirations: A few days ago, I poked around Microsoft’s first-party AI model family. Redmond’s recent MAI-Image-2.5 model MAI = Microsoft AI placed third on the Arena leaderboards https://arena.ai/leaderboard/ , which was impressive. But what about MAI-1-Preview, the company’s first “end-to-end foundational model?” It’s not available. Perplexing. Why was Microsoft not making the model more available? Here’s the answer, via The Verge’s Tom Warren https://www.theverge.com/report/940861/microsoft-build-ai-models-windows-dev-mode-what-to-expect : “Sources tell me that we’ll hear about new AI models in Windows, a new reasoning model from Microsoft AI, and a Copilot ‘super app'” at Microsoft’s upcoming Build developer event. Ah, so Microsoft has been in the kitchen all this time. Can MAI-2-Preview, or whatever the new model is called, put real points on the board for Microsoft? Here’s hoping. Nothing would bring me more joy than more competition in the AI game; more compeititon is more good, as we like to say. 📉 https://finance.yahoo.com/news/servicenow-pledges-1-5bn-investment-110000403.html Trending Down 📉 https://finance.yahoo.com/news/servicenow-pledges-1-5bn-investment-110000403.html Cybersecurity at https://www.404media.co/hackers-simply-asked-meta-ai-to-give-them-access-to-high-profile-instagram-accounts-it-worked/ … Meta slowing the compute rush https://www.reuters.com/world/china/arm-says-bytedance-oracle-use-its-data-centre-cpu-chips-2026-06-02/ … my faith in humanity https://www.axios.com/2026/06/02/ibm-meme-stock-trump … data portability https://techcrunch.com/2026/06/01/strava-declares-war-on-scrapers-ahead-of-ipo/ … childhood’s light https://www.nytimes.com/2026/06/02/well/children-vaccines-illnesses.html … comity in venture-land https://x.com/futurenomics/status/2061599940174918121 … the free press https://www.washingtonpost.com/national-security/2026/06/01/pentagon-bans-journalists-press-office-designating-it-classified-space/?pwapi token=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJyZWFzb24iOiJnaWZ0IiwibmJmIjoxNzgwMjg2NDAwLCJpc3MiOiJzdWJzY3JpcHRpb25zIiwiZXhwIjoxNzgxNjY4Nzk5LCJpYXQiOjE3ODAyODY0MDAsImp0aSI6IjAwNzYwMmUzLTdhYzctNDFmNS1iZTZkLWNjNTNhMWQwZGJmMiIsInVybCI6Imh0dHBzOi8vd3d3Lndhc2hpbmd0b25wb3N0LmNvbS9uYXRpb25hbC1zZWN1cml0eS8yMDI2LzA2LzAxL3BlbnRhZ29uLWJhbnMtam91cm5hbGlzdHMtcHJlc3Mtb2ZmaWNlLWRlc2lnbmF0aW5nLWl0LWNsYXNzaWZpZWQtc3BhY2UvIn0.55CqNlPEE XeV5grSA x57QwQHvbv0-J JyAvEbEYnA … your right to privacy https://www.bloomberg.com/news/articles/2026-05-28/trump-s-doj-ramps-up-probes-of-anonymous-ice-critics-with-x-reddit-subpoenas … SpaceX’s target IPO valuation: Good news, SpaceX’s upcoming IPO is getting discounted. All the way from a whisper-number of $2.0 trillion to $1.8 trillion https://finance.yahoo.com/markets/stocks/articles/elon-musks-spacex-cuts-ipo-203347271.html . The 10% haircut may spur demand for shares in the combined space-launch, social media, cloud computing, and AI conglomerate. And for investors curious about SpaceX’s growth prospects, the company updated its IPO filing with updated details on its compute deal with Anthropic. Here’s the old language https://www.sec.gov/Archives/edgar/data/1181412/000162828026036936/spaceexplorationtechnologi.htm : Anthropic has agreed to pay us $1.25 billion per month through May 2029, with capacity ramping in May and June 2026 at a reduced fee. The agreements may be terminated by either party upon 90 days’ notice. And the new language https://www.sec.gov/Archives/edgar/data/1181412/000162828026039276/spaceexplorationtechnologi.htm : Anthropic has agreed to pay us $1.25 billion per month through May 2029, with capacity ramping in May and June 2026 at a reduced fee. After the initial three-month period, the agreements may be terminated by either party upon 90 days’ notice. The wording of the S-1 filing now matches what CEO Elon Musk recently said on Twitter https://www.cautiousoptimism.news/anthropic-is-worth-a-trillion-wix-is-worth-nothing/ . So the deal is a three-month lease, with opt-outs from there on. How you want to weigh that against future revenue is up to you, but at least we now have clarity on the deal’s terms. This close to what could become the largest IPO of all time, details really do matter. Five questions we can’t wait to answer with Anthropic’s IPO filing Anthropic announced yesterday https://www.anthropic.com/news/confidential-draft-s1-sec that it had filed IPO documents with the SEC, albeit confidentially. Confidential IPO filings allow companies looking to list to get their docs in shape and gather feedback from regulators before sharing their results publicly and finally listing. Nothing odd here. The fact that Anthropic is now ready to file indicates we will get an Anthropic IPO this year. A third-quarter timing wouldn’t shock me either way. Sadly for you and me, a confidential IPO filing means that there are numbers out there, but we don’t have access to them. So today, we’re going to outline the things we most want to understand from Anthropic’s eventual public IPO documents: How does Anthropic count revenue sourced from cloud partners? Anthropic and OpenAI generate lots of revenue by selling access to their AI models on partner clouds, like Microsoft’s Azure or Amazon’s AWS. OpenAI reportedly counts https://x.com/EthanChoi7/status/2036638459868385394 revenue on a net basis minus partner share , while Anthropic reports the same revenue on a gross basis including partner share . As a result, Anthropic will report higher revenue and lower margins assuming cloud partner revenue share is a cost of revenue rather than a marketing expense . How the company does math will matter. If a lot of Anthropic revenue is really revenue share earmarked for cloud partners, investors could be dismayed by its relative to expectations real scale. What’s the gross margin profile of AI inference? At a very basic level, when Anthropic sells tokens on its own or via a cloud partner, how profitable is that marginal token? This data point will help us understand the true cost of AI inference today and whether or not the market can bear it. How much money did Anthropic lose offering underpriced subscription plans? That AI companies were subsidizing subscription plans is now common knowledge. But Will we be able to see, in the filings, just how subsidized those plans were? Will we be able to see gross margin improvements after limits were tightened? Faster upgrades? Revenue growth? And what will the company tell us about why it made those shifts? How capital-efficient has Anthropic been in terms of compute capex? OpenAI spends more on first-party data centers than Anthropic, but the latter company doesn’t spend zero. So, how much? And how does the company account for its long-term compute deals? Those should be obligations, right? I presume that if we compare Anthropic’s RPO to its long-term leases, it’s gonna be upside down. Does Anthropic look good under normal accounting? All that is fun, but Anthropic is at once an AI lab and a normal company. On the normie front, what does Anthropic look like sans nuance? If we just stare at its income statement, does it appear healthy? Yes, the market will be willing to grant the company a little room to maneuver thanks to its growth and prominence, but its IPO valuation will hinge in part on its basic, boring, GAAP results. This is where WeWork hit the skids; it had fancy talk, but terrible normal metrics. We have other questions, of course. Which investors own the most, the company’s larger debt profile, its operating cash flow results, and their improvement or not over time. The list goes on and on: What does the company say about bringing Mythos to market? Its relationship with the DoD? I could go on all day, but the above questions — and their eventual answers — are enough to form a pretty strong view of Anthropic. Now, we just need the damn filing.