▶ Full Post Text
Buffett confirmed on CNBC that he personally executed the trade, which involved buying $5 billion in Class A shares at $351.81 and $5 billion in Class C shares at $348.20. This transaction was part of Google’s $84.75 billion financing plan announced in June—the company’s first equity issuance in 20 years. The plan comprised approximately $49.6 billion in equity financing (including 6.25% mandatory convertible preferred stock) and a $20.3 billion note issuance, alongside an untapped $40 billion ATM offering—all while the company already held $240 billion in cash on its balance sheet.
A superficial interpretation might attribute this move to desperation: free cash flow had turned negative, forcing the company to raise external capital. However, this view falls apart when one examines where the funds are actually going. The capital is not primarily being used to purchase Nvidia GPUs. Google runs its AI operations using proprietary chips; over 75% of the computational tasks for the Gemini model are handled internally by TPUs (Tensor Processing Units). Instead, capital expenditure is directed toward TPU clusters, data center infrastructure, and most crucially power resources (including land, interconnection facilities, and gigawatt-scale power capacity). While chips are replaced every few years, gigawatt-scale power capacity and grid access are assets with fifty-year lifespans; competitors cannot simply conjure them out of thin air, no matter how much they are willing to pay.
Consider, too, which entities are already locked into this infrastructure. Anthropic has reportedly committed to spending $200 billion on Google Cloud over five years to power its operations using gigawatt-scale TPU computing power, an investment representing more than 40% of Google’s disclosed cloud services backlog. Furthermore, Google holds an equity stake in the company. Thus, Google is not merely building computing power for Gemini; it is positioning itself as a utility-like infrastructure provider, effectively collecting "rent" from competitors in the frontier AI lab space. Its ultimate goal is not to win the "model wars," but to control the lowest-cost token factory, regardless of who ultimately prevails, the generation of tokens takes place on Google’s machines. When tokens become commodities, profit margins shift to the lowest-cost producer; vertical integration (developing proprietary chips, securing energy supplies, and locking in key enterprise clients) is the essential path to becoming such a producer. Meanwhile, while the search business itself may not be the primary driver of future growth, that is beside the point: the search division’s quarterly revenue serves as the ammunition depot for this battle. An established monopoly is funding the quest to secure the next monopoly.
Viewed from this perspective, the decisions made by both parties in that June deal were rational. Google was not selling at a discount out of weakness; rather, it was rapidly converting a high-value currency into scarce assets, including energy, chips, and exclusive access to frontier AI labs. This pace of conversion far exceeded what its operating cash flow could support, as the window to secure these resources is open now, not in 2029. Buffett, for his part, was doing more than just "buying the dip." He purchased a search-based cash-printing machine at a forward P/E 22.5X, while simultaneously acquiring toll-road infrastructure leading into the AGI era.
This Wednesday brings a real-world test. Microsoft and Meta will release their earnings reports on the same evening the Federal Reserve announces its policy decision; we will then see if they, too, exhibit a similar capital expenditure trajectory. Two key things to watch: first, whether they follow Google’s lead and shift from self-funding to market-based financing; and second, whether other companies announce deals similar to the Anthropic agreement to lock in a leading AI lab. If both occur, it would signal that the entire industry has crossed a critical threshold in just a single quarter.
I’d like to ask: if future rents are derived from tokens, is buying this token machine at 22.5x PE actually a bargain?