Many of the world\u2019s largest technology companies have spent the past two decades generating ample cash to keep growing without the need for outside investment.<\/p>\n
But in the race to dominate the artificial intelligence industry, companies are opening themselves up to new money, borrowing cash and raising equity from investors after years of relying on their own profitability.<\/p>\n
On Thursday, Elon Musk\u2019s SpaceX, a rocket maker and leader in A.I., is seeking to raise $75 billion in an initial public offering that values the company at $1.77 trillion, making it the largest I.P.O. on record.<\/p>\n
Last week, with much less fanfare, Google\u2019s parent company, Alphabet, issued $80 billion in new shares to fund its own A.I. expansion. It was the largest ever stock raise from a company already listed on public markets.<\/p>\n
The rapid pace of fund-raising has led to comparisons to the dot-com bubble. And like the early internet companies of the 1990s, today\u2019s A.I. companies are finding deep, seemingly insatiable investor demand.<\/p>\n
\u201cIt feels very much like the late 1990s,\u201d said Steven Kaplan, a professor of finance at the University of Chicago Booth School of Business. \u201cThe markets are very risk-on, and there\u2019s a new technology that investors are incredibly excited about.\u201d<\/p>\n
This is unusual. For much of their history, the marquee tech companies have generated large amounts of cash, limiting the need to raise money elsewhere. Alphabet had roughly $125 billion of cash sitting on its balance sheet at the end of March. Microsoft had $80 billion.<\/p>\n
But the scale of the A.I build-out is now thought to be so colossal that even these cash-rich companies don\u2019t have enough to finance it by themselves. At the start of May, Goldman Sachs estimated<\/a> that the total spent on A.I. infrastructure this year would be $765 billion, with the total expected through 2031 rising to over $7 trillion.<\/p>\n Even if the companies involved could afford that on their own, the sheer willingness of investors to back A.I. projects means that the cost to these companies \u2014 through the amount of interest on debt or from the amount raised for each new share issued \u2014 of bringing in outside investors has remained attractive.<\/p>\n Alphabet had initially planned to raise $80 billion by issuing new shares earlier this month but increased the total to closer to $85 billion because of strong investor demand, according to two people familiar with the deal.<\/p>\n