Alphabet keeps the AI spending frenzy going
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Alphabet is going to spend more money on AI this year, and so are all the other hyperscalers that have reported earnings so far.
Why it matters: The shares of Alphabet bounced around in trading after hours as Wall Street digested a world where the ceiling on spending never comes.
- But shares of companies that benefit from that spending rose.
Driving the news: Alphabet plans to spend $180 billion at the midpoint of its projections for the year.
- Analysts tracked by Bloomberg expected Alphabet, Google's parent company, to spend just under $120 billion.
- This comes after Alphabet spent over $90 billion in 2025.
Zoom out: More spending presents a challenge for investors who have bid up Alphabet as their AI darling given its penchant for responsible spending.
- Capex as a proportion of cash flow is the lowest for Alphabet among the hyperscalers.
- But 2026 investors want a story on how this spend is benefiting profits.
- That's why Meta soared after its earnings report: Yes, the company increased spending, but it told a story about how that spending is fueling great ad revenue.
Follow the money: Of course, there are beneficiaries of Alphabet opening its pocketbook.
- Chipmakers Nvidia, Broadcom and AMD popped up after the market close, even though all three were down during the trading day as investors rotated out of tech.
Between the lines: Even if the spending isn't viewed as justified longer term, it's going to lead to boosted earnings near term for the companies providing the chips to power the AI buildout.
The bottom line: Investors are more skeptical of the AI buildout.
- Unless you have a compelling story of return on your AI investment.
