Google's $80B AI Raise: Same as Strategy?
45sDraws a surprising parallel between tech giants and Bitcoin treasury companies, sparking curiosity and debate.
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The video discusses the current state of Bitcoin and the broader financial markets, arguing that capital markets operations are fundamentally the same across companies like Strategy (formerly MicroStrategy) and Alphabet. The speaker explains that companies raise capital through equity, preferreds, or debt and invest in assets that outgrow the cost of that capital, with AI being the current growth driver. He also touches on Bitcoin's bear market, its underperformance relative to other assets, and the potential for future re-rating.
Chapters
[00:01]
Capital Markets Operations Are the Same
All capital markets operations are exactly the same: raise capital and invest in something that outgrows the cost of capital. Examples include Google building out AI with $30-40 billion underwritten, and Berkshire's private placement with a discount.
[00:18]
AI Companies Diluting Stock
AI companies are diluting their stock to invest in AI, which is growing above the cost of capital. Strategy is doing the same, raising capital at a cost of 11.5%.
[00:44]
The Game: Raise Capital, Invest in Growth
Markets can only raise dollar cash through equity, preferreds, or debt, and invest in something that outgrows the cost of that capital. Raising equity has zero cost, while Strategy's cost is 11.5%.
[01:10]
Simple Strategy
The strategy is simple: raise capital for free, invest in something growing faster. Alphabet, Strategy, and every other public company in the S&P 500 do this.
[01:24]
Bitcoin in Bear Market
Bitcoin is in a bear market, down 50% from its high of $70,000 per coin, and is underperforming other assets.
[01:38]
Professionals Do the Right Things
Professionals are professional because they do the right things over and over, which is where excess returns come from.
[01:53]
Economic Boom and Dollar Debasement
There is a huge economic boom due to AI, dollars are being debased, and US manufacturing activity is rising. Bitcoin outperforms when bought in a bear market, not a bull market.
[02:19]
Recession Indicators and Expansion
Durable goods equipment and PMIs are going up, indicating the start of a massive economic expansion driven by AI. Public markets raise capital via debt and invest in something that outruns the debt.
[02:32]
Bitcoin's 200-Week Moving Average
Bitcoin is underperforming other assets and is below its 200-week moving average, making it difficult for investors to put money in.
[02:47]
Positive Outlook
The speaker is positive on Bitcoin, recommending a long-term strategy. He mentions Bybit for trading crypto, with a deposit bonus up to $30,000.
[03:14]
Basic Investments
A handful of basic investments: Bitcoin, gold, Nasdaq, S&P. AI is the growth driver, so Nasdaq outperforms.
[03:28]
Cash Management and Risk
Cash management options: take more risk with Strategy (paying 11.5% dividends) or more certainty with less return.
[03:55]
Stay When Growth Comes
Growth rates require staying invested when growth comes. Companies sell Bitcoin, but the 200-week moving average is where performance comes from.
[04:11]
Similar Point to FTX Flop
We are at a similar point in relation to the overall growth trend as the FTX flop. Not many people invest here, but it's a bear market with everyone given up.
[04:23]
Institutional Penetration
Institutional penetration of ETFs and digital asset treasuries is increasing. Don't worry about the price; Bitcoin has long bear markets then suddenly re-rates.
[04:49]
Volatility and Long-Term Returns
If you don't want volatility, choose S&P or money market fund, but you'll reduce longer-term results because Bitcoin has much higher returns over the long term.
[05:02]
Market Cap by Asset
We're seeing a huge growth phase with money being sucked up by AI. Anthropic, SpaceX, OpenAI are the biggest IPOs in history. Google is raising $80 billion, more than Strategy has raised in its entire history.
[05:28]
Early Stages of BTC
The comparison shows how small we are and that we're still in the early stages of BTC. Underperformance will continue for a while, then suddenly re-rate.
[05:40]
Bitcoin Is Here to Stay
Bitcoin is an asset people own; it's not going away. The speaker promotes Bybit for trading Bitcoin and crypto.
The speaker emphasizes that capital markets operate on a simple principle: raise capital and invest in growth. Bitcoin is in a bear market but is expected to re-rate eventually, and investors should focus on long-term strategies rather than short-term price movements.
Mentioned in this Video
Study Flashcards (6)
What is the fundamental strategy of capital markets according to the video?
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What is the fundamental strategy of capital markets according to the video?
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Raise capital through equity, preferreds, or debt, and invest in something that outgrows the cost of that capital.
00:44
What is Strategy's cost of capital mentioned in the video?
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What is Strategy's cost of capital mentioned in the video?
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11.5%
00:57
What is Bitcoin's current market status according to the video?
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What is Bitcoin's current market status according to the video?
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In a bear market, down 50% from its high of $70,000 per coin.
01:24
What does the speaker say about Bitcoin's performance in bull vs bear markets?
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What does the speaker say about Bitcoin's performance in bull vs bear markets?
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Bitcoin underperforms in bull markets and outperforms when bought in bear markets.
02:06
What is the 200-week moving average used for?
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What is the 200-week moving average used for?
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It is a key indicator for Bitcoin's long-term trend; performance comes from staying near it.
02:32
What is the speaker's view on Bitcoin's long-term returns compared to other assets?
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What is the speaker's view on Bitcoin's long-term returns compared to other assets?
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Bitcoin has typically much higher returns over the long term.
05:02
💡 Key Takeaways
⚖️
The Game: Raise Capital, Invest in Growth
Explains the core principle of capital markets in a simple, memorable way.
00:44
📊
Bitcoin in Bear Market
Provides a clear, factual statement about Bitcoin's current market condition.
01:24
💡
Bitcoin Performance in Bull vs Bear Markets
Offers a contrarian insight that challenges common investment timing assumptions.
02:06
💡
Early Stages of BTC
Highlights the potential for future growth by comparing Google's capital raise to Strategy's entire history.
05:02Full Transcript
[00:01] strategy recently selling Bitcoin and what they're doing and oh, it's a scam, All capital markets operations are exactly the same. So, this is Google or build out AI. And they've underwritten 30 billion in
[00:18] uh 40 billion, uh this is for class A and C, and then Berkshire. Private placement. So, Berkshire got a discount to the market price, a little bit of a discount, straight cash for new
[00:32] Uh the AI companies are diluting their stock right now in order to invest in something that is growing above the cost of capital, which is AI. Now, that's what Strategy are doing.
[00:44] markets can only do one thing, which is raise dollar cash through equity, preferreds, or debt, and then invest in something that outgrows the cost of that capital. Now, if you're raising equity, the cost is zero.
[00:57] Strategy, their uh cost is currently 11 and 1/2%, maybe that goes down and up. It's the same game. It's exactly the same game. It's exactly the same. Right? Raise capital basically for free, invest in something that's growing at a faster
[01:10] That's it. It's really, really simple. Alphabet are doing it, Strategy are doing it, every other public company is doing it in the S&P 500, that's what they do. That's the game, right? In terms of Bitcoin, who cares, right? This
[01:24] thing is in a bear market, 50% down from a high, 70,000 a coin. to 40%. Uh Bitcoin is kind of underperforming now,
[01:38] which is where all the all of the actual excess returns come. So, it's really as simple as that, right? Professionals are professional because has gone home. They do the right things over and over, right?
[01:53] There's a huge economic boom because of AI and everything like that. Dollars are being debased. US manufacturing activity is rising. That's fantastic news. Bitcoin, when you buy it in a bull
[02:06] not the best, right? When you buy it in a bear market, it outperforms. So, we're in a bear market right now. Right, this is um kind of recession indicators. The
[02:19] durable goods equipment going up, you see the PMIs going up. We're in a the start of a massive economic expansion driven by AI, driven by all of this And the public markets are the same. You raise capital, either you you just
[02:32] debt and you invest in something that outruns the debt. That's it. Bitcoin's 200-week moving average. It's underperforming other assets right now. it's like difficult, right? It's like, "Ah, I want to put money in. I'm not
[02:47] while." That's the game. So, anything but kind of positive right here. If you do trade crypto, Bitcoin, all on Bybit. Click the link in the description, make a deposit, they'll
[03:00] give you a deposit bonus up to $30,000 to trade with. It's not interesting or investing, but this is one of those times where your strategy over the long growth rate. You know the Nasdaq has a growth rate. Right? So, you've got
[03:14] basically a few like a handful of basic investments. Bitcoin, gold. What do you percentage of your portfolio is it? You have Nasdaq, S&P. the outperformance cuz AI is the growth, right?
[03:28] That's pretty much it. Now you've got cash management. Do you want something Want to take a bit more risk on that one because well strategy, you don't really know. Okay, great, but they're paying 11 and 1/2%
[03:41] price. And they keep paying the dividends. You you. Or if you just want, you know, more certainty but way less return, then mean there's nothing else to invest in, right?
[03:55] years, the growth rates, you have to you stay when the growth comes. Look, they sold some Bitcoin right here. This is what companies do. 200 week moving average,
[04:11] this is where you get the performance, right here. This was the FTX flop. We're at a similar point in relation to the overall growth trend. Not many people invest here. It's kind of a little bit strange. But,
[04:23] bear market. Everyone's given up and it's at 70,000 a coin. It's right on trend. It's going well, right? It's going well. Institutional penetration of ETFs and digital asset treasuries. I mean look at
[04:37] don't worry about the price, right? If you have a shorter time horizon, maybe don't put everything in Bitcoin because Bitcoin usually has these long bear markets and then suddenly it
[04:49] re-rates, right? That's how it works. If you don't want that volatility, then that's like S&P, money market fund, but you'll be reducing, I think, longer term results, right? Because Bitcoin does have typically much higher returns
[05:02] over the long term, right? Market cap by asset, these are all the We're seeing a huge growth phase. It's all the money is being sucked up by AI and all of that, right? Anthropic, SpaceX. These are the biggest IPOs in
[05:15] history, right? Anthropic, SpaceX, OpenAI, all of the other ones, right? Google now, basically an IPO. $80 billion they're raising. That is more than strategy has raised in their entire history to buy Bitcoin. Or at one and a
[05:28] their knickers in a twist about, "Oh, strategy and Google raising 80 billion." So, it just shows us how small we are and how how we're still actually in the early stages of of BTC. So, it's going
[05:40] on underperformance for a while and then suddenly like this it re-rates. That We all know that now. It's an asset. People own it. It's not going away. So, If you trade Bitcoin crypto, you can trade them all on Bybit. Click the link
[05:55] they'll give you a bonus to trade with. I'm James from Invest Answers, cheers for watching, and I'll see you in the next one.
