LIVE MARKETS-Equity raise by hyperscalers could pose a risk to U.S. stocks
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EQUITY RAISE BY HYPERSCALERS COULD POSE A RISK TO U.S. STOCKS
The world's largest tech companies are increasingly turning to debt and equity markets to fund AI infrastructure investments, marking a shift from their longstanding practice of funding investments largely with cash.
Alphabet GOOGL.O announced plans last week to raise $84.75 billion in upsized equity offerings, as big tech companies compete to build data centers and capitalize on growing demand for AI.
Meta Platforms META.O is reportedly weighing a stock offering worth tens of billions of dollars. Alphabet's shares have fallen about 1.6% after the announcement, while Meta shed nearly 7.8% since the FT report.
"Hyperscalers issuing equity and diluting existing shareholders is a risk to watch," Brian Jacobsen, chief economic strategist at Annex Wealth Management.
Jacobsen said that funding risky investments through equity may support financial stability, but existing shareholders are unlikely to welcome the resulting dilution.
Goldman Sachs strategists expects 2026 to be a record year for the dollar value of U.S. equity issuance, driven by larger transactions.
(Joel Jose)
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