Alphabet Taps Investors to Fund Its AI Buildout

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0:33California voters head to the polls in a closely watched primary to choose Governor Gavin Newsom's successor. Plus, a massive Russian attack on cities across Ukraine kills at least 11 people. And cap in hand, Google asks for billions to fund the AI build-out. Companies like Google and Microsoft have been using their internal profits to reinvest in AI. They've been raising debt, which they have to pay back. And so this is the next leg. We're going to go to our shareholders and ask for more money, which is a commitment. It's Tuesday, June 2nd. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today.

1:19It is primary day in a number of U.S. states, including the nation's largest, California. National politics reporter Eliza Collins has been covering the race for governor there. Despite some early chaos in the field of Democrats seeking the office, including Representative Eric Swalwell's abrupt exit from the contest amid sexual misconduct allegations, the contest has quieted down considerably. So unlike most places, California has a top two primary system, which means everybody is competing against one another and the top two candidates make it out. California should not be a state where Democrats are worried.

1:58But they were briefly because there were so many Democrats in the race that were splitting the vote that for a few weeks, two Republicans were the leading candidates in polls. And that meant that there was a chance Republicans would be the only two to go to the general election. President Trump actually helped them out here by endorsing one of the candidates. So the Republican field consolidated behind Steve Hilton, a former advisor to former British Prime Minister David Cameron and a Fox News host. The two Democrats are Javier Becerra, the former Health and Human Services Secretary, and Tom Steyer, a billionaire turned Democratic activist.

2:43While these people are somewhat known, they're not big enough names and the party has not consolidated around any one candidate. By comparison, Eliza said that L.A.'s mayoral race, pitting incumbent Democrat Karen Bass against fellow Dem Nithya Rahman and Republican Spencer Pratt, could provide the fireworks, with polls showing a tight three-way contest. Pratt was seen as a complete long shot. I think he is still absolutely a long shot to be mayor of Los Angeles. It's just such a democratic place. But what his rise really does show is that the current mayor, Karen Bass, the incumbent, is not popular.

3:22This is a city that was ravaged by wildfires, continues to have homelessness, continues to have problems with unaffordability, and Pratt's campaign is really hitting her on all of those things. Polling shows that Pratt has a real chance, as does Rahman, of the two of them keeping Bass from hitting above 50 percent, forcing her into a runoff. Beyond the Golden State, voters in Iowa, Montana, New Jersey, New Mexico, and South Dakota are also heading to the polls today. We'll recap any key results from those contests tomorrow morning.

3:57Let's turn to Ukraine now, where Russia launched an overnight barrage of 73 missiles and over 600 drones, killing at least 11 people and damaging civilian infrastructure across multiple cities, including the capital, Kiev. While Ukrainian air defenses intercepted the majority of the weapons, rescue operations continue for those still trapped beneath the rubble. It comes after Ukrainian President Volodymyr Zelensky warned last week that Russia was preparing a renewed assault and pressed allies for more air defense missiles to counter the attacks. Ukrainian MP Oleksiy Goncharienko spoke to the BBC's Today program from Kiev this morning and said the attention of world leaders had been drawn away by other conflicts.

4:42The United States now definitely completely absorbed by what's going on in the Middle East. And in reality, the negotiations which were started by President Trump for last year, they have no result for the moment. The Russian defense ministry said the strikes were a response to previous Ukrainian attacks. The Trump administration is proposing a new 25 percent tariff on a swath of imports coming from Brazil. Top U.S. trade official Jameson Greer says the move comes after a year-long investigation into unfair trade practices ranging from digital trade policies to illegal deforestation. While the levies hit areas like electronic payments and ethanol, everyday staples like beef and coffee are being left off the list.

5:27The new tariffs are subject to public comment, and a decision is expected by July 15th. The USTR has several other open Section 301 investigations expected to lead to new duties. Among those are one covering excess industrial capacity in China and 15 other trading partners, as well as one probing enforcement of forced labor bans in some 60 countries.

5:53What is holding up a deal between the U.S. and Iran? In addition to concerns about Iran's nuclear program and questions around control of the Strait of Hormuz, Journal of Foreign Correspondent Stephen Kalin reports that President Trump has thrown an additional curveball into proceedings, insisting that Arab states welcome a future deal by using the opportunity to recognize Israel. Stephen, walk us through what we've been learning about this apparent demand now coming out of the White House here. Yeah, so the president made this demand to a number of Arab states, as well as Pakistan and Turkey, just over a week ago on a phone call that he had with the leaders from those countries.

6:32He's brought it up a couple more times, most recently in a cabinet meeting, where he basically said that the deal with Iran was getting close to being finalized, And he wanted to see the rest of the Arab countries and some others, Pakistan and Turkey, join the Abraham Accords, which is basically a pact recognizing Israel as part of that deal, sort of as an acknowledgement and a vote of gratitude for the end of the Iran war. And remind us, I mean, getting more countries to normalize relations with Israel have been a big priority for Trump in his first term. Here in the second term, though, Israel's war in Gaza has really put a lot of Arab states off that notion, though, right?

7:11That's right. Saudi Arabia was actually getting really close to normalizing back in 2023 under the Biden administration. And that was literally weeks before the October 7th war began, the October 7th attack, and then the Gaza war. And so Saudi paused all those conversations. And it's actually become much more difficult in the last few years for Arab governments and particularly unpopular among their populations. The perspective from a lot of these capitals is that nothing's changed in terms of what their demands are for normalizing with Israel, which is progress and movement on establishing a Palestinian state and resolving the heart of that conflict.

7:48So given that then, Stephen, why would Trump do this? Add yet another thing that has to be achieved before a potential deal is reached. Yeah, it seems like a complicating factor on an already very complex set of negotiations. The Abraham Accords, which are the name that he gave to the normalization deals with Israel back in his first term, are really one of his biggest foreign policy achievements, and that's acknowledged pretty much across the board. And so perhaps tying one of his greatest successes to what has become a foreign policy mess in the Iran war is an attempt to try to push the narrative beyond what the U.S.

8:23is getting or isn't getting from the Iran deal to something, you know, a broader piece across the region. Yeah, to put a finer point on that, we reported on Monday that some hawks, in particular in Israel, have been wary that a deal with Iran would leave open questions about its nuclear program or the future of the Strait of Hormuz. So it seems like this could maybe be an effort to sort of pacify some of those voices if the rest of the deal maybe doesn't live up to their expectations. Yeah, I mean, it might please some constituencies in Israel, but the Gulf states have a lot of those same concerns.

8:51They're worried about the straits not being reopened fully, about Iran being emboldened and more likely to attack them in the future. And a move like this, recognizing Israel, which has just participated in this massive war against Iran, would really only antagonize Iran further. And so it's not really, doesn't really seem to be in the interest of these Gulf states. Journal Foreign Correspondent Stephen Kalin, appreciate you as always. Thanks so much for bringing us this story. Thanks for having me, Luke. Coming up, we'll look at the growing backlash against robo-taxis cropping up in cities around the world.

9:22That story and more after the break. This episode is brought to you by Harvey, an AI platform designed for legal and professional services. Built and tested by lawyers, Harvey is trusted by more than 60 % of the AMLA 100. The platform dramatically reduces time spent on research, drafting, and document review without sacrificing quality, all while meeting the highest industry standards for security and compliance. Harvey. AI tailored for law. Visit Harvey.ai to learn more and request a demo.

10:03In markets news, Google is tapping equity markets for$80 billion to fund its AI buildout. The company yesterday announced an agreement to sell$10 billion worth of stock to Berkshire Hathaway, with a further$70 billion in additional issuances to come this year by various other means. I asked Journal Finance editor Alex Frangos what to make of Google's approach as it stares down projected CapEx this year that could run close to$200 billion, with a likely higher bill coming next year. It's a huge deal. I mean, it's one of the biggest equity issuances of a company ever. And Google has huge spending needs, like everyone in this race to dominate AI needs billions and billions, tens of billions of dollars.

10:46Google has an advantage over a lot of other companies. Its stock price has done really well. It's worth$4.5 trillion. dollars. So issuing stock to raise 80 billion is just skimming the cream off the top of its value. It's 1.7 % of its outstanding shares that it's going to issue. So it's not going to have a huge effect on existing shareholders, but allows them to raise a huge amount of money. And it's a shot across the bow at everyone else to show like, hey, Google can raise money super easily. Like Shareholders love this company. They will give them, for now, whatever they need to win this race.

11:28And Blackstone has raised more than$13 billion for its largest Asia private equity fund, exceeding a$10 billion target and becoming the latest firm to try and capitalize on growth in the region. Sweden-based EQT in April raised more than$15 billion for its Asia-Pacific private Equity Fund, while Bain Capital amassed$10.5 billion in May for its fund focused on deals in Asia. And finally, this was supposed to be the year of the robo-taxi, with Waymo, Tesla, and Amazon's Zooks launching AI-powered cabs in dozens of cities. But amid reports of robot cars colliding with humans, literally and figuratively, public and governmental scrutiny of the rollout is rising.

12:16There's been a number of cases over the past several months since the start of the year that I think have coalesced to draw attention to the way that robo-taxis conduct themselves on the road. Otto's reporter Sean McLean says that conduct ranges from the strange, such as when Waymos overran a quiet cul-de-sac in Atlanta, to more serious incidents, like when one struck a child in Santa Monica, sparking an NTSB probe. I think any one of these incidents would be an eyebrow-raising moment, but I think there's been enough of these cases now where people are concerned. Everybody is asking how ready these vehicles are to navigate the roads alongside human drivers.

12:57Human drivers make mistakes all the time, but there's a lower tolerance for mistakes made by AI, which Sean says is at the heart of the rollout debate. Increasingly, we're seeing local regulators, taxi unions, residence associations, lawyers get involved in some of these disputes. And it does have an impact on the ability of these vehicles to go onto our streets. For example, in the state of New York, Governor Hochul there had been considering allowing commercial robo-taxi services to start this year when they pass a new budget. But she backtracked, specifically because there was a lack of legislative support for the measure.

13:35So public relations between these robo-taxi companies, between taxi unions, between city counselors and state officials, like it does matter. Waymo has said that their ultimate goal is to reduce car crashes down to zero while acknowledging that they have to earn the public's trust and that there's still more to be done. For much more on the controversial robo-taxi rollout, check out today's tech news briefing podcast. And that's it for What's News for this Tuesday morning. Today's show was produced by Hattie Moyer. Our supervising producer is Sandra Kilhoff, and I'm Luke Vargas for The Wall Street Journal.

14:11We will be back tonight with a new show. And until then, thanks for listening.

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