Alphabet has revealed plans to spend between $175bn and $185bn this year, well above Wall Street expectations as it ramps up its momentum in the global artificial intelligence race.
The capital expenditure target is above analysts’ average forecast of $115bn, according to LSEG data, and marks another surge in capital among the world’s technology hyperscalers.
The announcement came along with strong fourth quarter results. Revenue rose 18 per cent year-on-year to $113.8bn, slightly ahead of forecasts of $111.3bn. Net income rose 30 per cent to $34.5bn, comfortably beating expectations of $31.9bn.
Despite the earnings beat, Alphabet’s shares fell 1.4 percent in after-hours trading, reflecting investors’ unease with the scale of spending commitments.
Under CEO Sundar Pichai, Alphabet has repositioned itself as a leading force in AI after earlier concerns that startups like OpenAI could disrupt its core search business.
Google’s Gemini model has become a key pillar of its strategy, with the Gemini AI assistant app having more than 650 million monthly users in November. Its AI Overviews feature within search has reached over 2 billion monthly users.
The company is also investing heavily in custom AI chips and data center infrastructure, which investors hope will fuel future growth.
Last month, Google secured a high-profile partnership with Apple to enable an enhanced version of Siri on Gemini models, opening up access to Apple’s installed base of more than 2.5 billion devices.
Nikhil Lai, principal analyst at Forrester, said the results reflect strength in Alphabet’s core advertising business. “The ad revenue record shows momentum in search and strong performance from YouTube,” he said, noting that YouTube’s scale now exceeds that of Netflix.
Alphabet’s shares have surged over the past year, rising more than 64 percent and pushing their market capitalization to more than $4tn – second only to Nvidia, which is valued at $4.3tn.
However, broader market sentiment toward AI stocks has turned more cautious. Last week, Microsoft reported slower cloud growth, prompting a sell-off amid concerns about the sustainability of AI investments. While Meta reassured investors about its earnings guidance, other names struggled.
The S&P 500 and Nasdaq both declined as investors reassessed higher valuations. Shares in Advanced Micro Devices fell sharply after a weak earnings outlook, while Palantir also fell on concerns about AI spending.
Jed Ellerbroek, portfolio manager at Argent Capital, said the level of AI infrastructure development was unprecedented. “The market has a problem knowing where to sell these stocks and what the future looks like,” he said. “There are growing doubts about whether the meeting has reached its peak.”
For Alphabet, the strategy is clear: double down on infrastructure to secure long-term AI leadership. Whether investors remain willing to fund that ambition at such a rate will depend on how those big commitments translate into sustainable returns.
