Google Parent Alphabet Plans to Spend $75B This Year, as Big Tech Goes All in on AI
In a move that underscores the growing importance of artificial intelligence (AI) in the tech industry, Google parent Alphabet (GOOGL) has announced plans to invest a staggering $75 billion in capital expenditures this year. This massive investment is aimed at bolstering the company’s technical infrastructure, including servers and data centers, to keep pace with the exploding demand for AI.
Accelerating Spending on AI Infrastructure
Alphabet’s commitment to AI infrastructure spending is not an isolated move. Big Tech rivals, including Meta (META) and Microsoft (MSFT), have also pledged tens of billions of dollars to capital expenditures this year. This surge in spending is driven by the need to support the growing demand for AI-powered services and to stay ahead of the competition.
Google Cloud’s Compute Capacity Surges
According to Alphabet CEO Sundar Pichai, Google Cloud customers have consumed more than eight times the compute capacity they did 18 months ago. This rapid growth in demand has necessitated the massive investment in technical infrastructure. Pichai emphasized that the investment is crucial to maintaining Google’s leadership in the AI space.
Meta and Microsoft Also Commit to AI Spending
Last week, Meta announced plans to invest $60 billion to $65 billion this year, while Microsoft committed to spending $80 billion on infrastructure in its 2025 fiscal year. These investments demonstrate the industry’s recognition of AI’s transformative potential and the need to invest heavily in infrastructure to support its growth.
Chinese Competition Heats Up
The emergence of Chinese firms like AI startup DeepSeek has set in motion what Bank of America analysts are calling “AI’s Sputnik moment.” DeepSeek’s claim to have developed an AI model rivaling American ones for a fraction of the cost has raised concerns that U.S. hyperscalers like Alphabet, Microsoft, and Amazon (AMZN) may need to spend even more on AI to stay competitive.
Implications for Chipmakers
The increased spending on AI by Big Tech companies could have significant implications for chipmakers like Nvidia (NVDA). Nvidia received a shoutout from Pichai during Alphabet’s earnings call, with the CEO emphasizing Alphabet’s intention to continue its “strong relationship” with the chipmaker. Nvidia’s Blackwell platform has already been adopted by Alphabet, and the company is likely to benefit from the growing demand for AI-powered services.
Alphabet’s Stock Performance
Despite the excitement around Alphabet’s AI investments, the company’s stock fell nearly 8% in extended trading Tuesday after its fourth-quarter cloud revenue missed analysts’ expectations. However, the stock had closed at a record high of $206.38 and has added about 43% over the past 12 months through Tuesday’s close.
Key Takeaways
– Alphabet plans to invest $75 billion in capital expenditures this year, primarily in technical infrastructure.
– Big Tech rivals, including Meta and Microsoft, have also committed tens of billions of dollars to AI infrastructure spending.
– The surge in spending is driven by the growing demand for AI-powered services and the need to stay ahead of the competition.
– Chinese competition from firms like DeepSeek is heating up, and U.S. hyperscalers may need to spend even more on AI to stay competitive.
– Chipmakers like Nvidia are likely to benefit from the growing demand for AI-powered services.
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EXCERPT
Google Parent Alphabet Plans to Spend $75B This Year, as Big Tech Goes All in on AI
Google parent Alphabet (GOOGL) said it plans to invest $75 billion in capital expenditures this year, as it joins Big Tech rivals in accelerating spending on artificial intelligence infrastructure.
On the company’s fourth-quarter earnings call, CFO Anat Ashkenazi said a majority of that spending would “go towards our technical infrastructure, which includes servers and data centers,” with $16 billion to $18 billion expected in the first quarter.1
The investment is needed to keep up with demand for AI, CEO Sundar Pichai said, with Google Cloud customers consuming more than eight times the compute capacity they did 18 months ago.
The announcement comes just days after Meta (META) and Microsoft (MSFT) also committed tens of billions of dollars to capital expenditures this year as they build out their AI infrastructure. Last week, Meta said it plans to invest $60 billion to $65 billion this year, while Microsoft said it plans to spend $80 billion on infrastructure in its 2025 fiscal year.
The major capital commitments also come as the emergence of competition from Chinese firms like AI startup DeepSeek set in motion what Bank of America analysts are saying could be “AI’s Sputnik moment.” The analysts suggested DeepSeek, which claimed to develop an AI model rivaling American ones for a fraction of the cost, could push U.S. hyperscalers like Alphabet, Microsoft, and Amazon (AMZN) to spend even more on AI. Amazon is expected to report fourth-quarter earnings after the market closes Thursday.2
Greater AI spending from Alphabet and its peers could be good news for chipmakers like Nvidia (NVDA), which received a shoutout from Pichai during Alphabet’s earnings call. Pichai said Alphabet intends to continue its “strong relationship” with Nvidia, after announcing its first customer running on Nvidia’s Blackwell platform last week.
Shares of Alphabet fell nearly 8% in extended trading Tuesday after the tech giant’s fourth-quarter cloud revenue missed analysts’ expectations. The stock had closed at a record high of $206.38, and added about 43% over the past 12 months through Tuesday’s close.
Source: Investopedia
