Key Points:
- Alphabet plans to spend up to $185 billion this year, far above estimates. The company’s stock price fell by over 6% following the announcement.
- Google Cloud revenue jumped 48% to $17.7 billion in the fourth quarter.
- Tech giants, including Meta and Microsoft, will spend over $500 billion combined on AI.
- Google’s deal with Apple puts Gemini AI on 2.5 billion devices.
Alphabet shocked Wall Street on Wednesday by announcing a massive increase in spending. The Google parent company plans to pour between $175 billion and $185 billion into capital expenditures this year. This target shatters the $115 billion average that financial analysts predicted. The market reacted immediately to the sticker shock, sending shares tumbling more than 6% during extended trading.
The driving force behind this huge price tag is the intense race for artificial intelligence dominance. Google needs to build more data centers and buy powerful chips to keep up. The company’s cloud division is already proving that the demand exists.
Google Cloud revenue surged 48% to $17.7 billion in the fourth quarter, easily beating the 35% growth experts anticipated. However, like its main rivals, Amazon and Microsoft, Google struggles with hardware shortages that prevent it from serving every potential customer.
Google isn’t alone in this expensive gamble. Along with Meta and Microsoft, these tech giants will likely spend a combined total of over $500 billion on AI infrastructure this year. Meta recently shocked investors by hiking its own investment budget by 73%. While shareholders worry about when these massive investments will pay off, Google insists the results are already visible.
The company’s AI products are gaining serious traction. The launch of the Gemini 3 model in November received high praise. It was reportedly so capable that OpenAI CEO Sam Altman issued an internal “code red” to his team to speed up their own development.
The user numbers support this confidence. The Gemini assistant app now attracts over 650 million users every month. Additionally, Google’s “AI Overviews” feature in search results reaches more than 2 billion monthly users.
Google also secured a critical victory last month by striking a deal with Apple. Google’s models will now power a revamped Siri voice assistant. This partnership unlocks a massive new audience, putting Google’s tech on over 2.5 billion Apple devices worldwide. Despite the short-term stock drop, Google is clearly playing to win the long game.
