Alphabet has revealed plans to spend between $175 billion and $185 billion this year, far exceeding Wall Street expectations, as the company ramps up its push in the global artificial intelligence race.
The investment target is well above analysts’ average forecast of around $115 billion, according to LSEG data, and marks a further escalation in spending by global technology hyperscalers.
The announcement was accompanied by strong fourth quarter results. Revenue rose 18 percent year-over-year to $113.8 billion, just above forecasts of $111.3 billion. Net income rose 30 percent to $34.5 billion, significantly exceeding expectations of $31.9 billion.
Despite the profit increase, Alphabet shares fell 1.4 percent in after-hours trading, reflecting investor unease over the size of spending commitments.
Under CEO Sundar Pichai, Alphabet has repositioned itself as a leader in AI after concerns that startups like OpenAI would disrupt its core search business.
Google’s Gemini model has become a central pillar of its strategy, with AI assistant app Gemini having more than 650 million monthly users as of November. The AI overview feature within search has reached more than 2 billion users monthly.
The company is also investing heavily in custom AI chips and data center infrastructure, which investors hope will drive future growth.
Last month, Google struck a high-profile partnership with Apple to power an updated version of Siri with Gemini models, providing access to Apple’s installed base of more than 2.5 billion devices.
Nikhil Lai, principal analyst at Forrester, said the results showed the resilience of Alphabet’s core advertising business. “Record advertising revenue signals continued momentum in search and solid performance from YouTube,” he said, noting that YouTube’s size now exceeds that of Netflix.
Alphabet’s shares have soared over the past year, rising more than 64 percent and pushing its market capitalization to over $4 trillion – second only to Nvidia, valued at around $4.3 trillion.
However, overall market sentiment has become more cautious towards AI stocks. Last week, Microsoft reported slower cloud growth, triggering a sell-off amid concerns about the sustainability of its large AI investments. While Meta reassured investors with optimistic sales forecasts, other names struggled.
Both the S&P 500 and Nasdaq fell as investors reassessed lofty valuations. Shares of Advanced Micro Devices fell sharply after a weak sales outlook, while Palantir also fell on concerns about AI spending.
Jed Ellerbroek, portfolio manager at Argent Capital, said the scale of the AI infrastructure buildout is unprecedented. “The market is having a hard time determining the price of these stocks and what the future holds,” he said. “There is growing skepticism about whether the rally has reached its peak.”
For Alphabet, the strategy is clear: doubling the infrastructure to secure AI leadership in the long term. Whether investors continue to be willing to fund this goal at this scale will depend on how quickly these huge capital commitments translate into sustained returns.
