Google parent Alphabet’s stock plunged by greater than 8% — wiping out greater than $200 billlion in market value — after the search giant unveiled plans for a large uptick in AI-related spending despite a slowdown in revenue.
Google and other US tech firms are facing intense investor scrutiny over their ballooning AI spending plans after Chinese startup DeepSeek revealed last month it had trained a model for lower than $6 million – purportedly without access to chip supplier Nvidia’s best hardware.
Alphabet shares in midday trades were recently off 7.6% at $190.70. If the stock selloff holds, it will erase all of Alphabet’s stock gains because the start of the yr.
CEO Sundar Pichai said Google would spend a whopping $75 billion on capital expenditures in 2025 alone – up from $52.5 billion last yr and far higher than the number expected by analysts.
“If that is the brand new trend for Alphabet, then investors ought to be frightened,” said D.A. Davidson analyst Gil Luria.
Pichai said that DeepSeek had done “very, superb work” but asserted that Google’s AI products were “a few of the best models on the market.” He also defended Google’s spending plans.
“The associated fee of truly using [artificial intelligence] goes to maintain coming down, which can make more use cases feasible,” Pichai added. “And that’s the chance space.”
Revenue from Alphabet’s cloud-computing division rose 30% — lower than the 35% jump from the corporate’s previous quarter and worse than Wall Street expected.
Overall, the Google parent reported quarterly revenue rose 12% to $96.5 billion – its lowest growth rate since 2023.
“While the Cloud segment delivered revenue growth of 30%+ for a second consecutive quarter, results were barely below investor expectations,” Wedbush analyst Dan Ives said in a note to clients. “That said, management commentary was positive and indicated that demand outpaced available capability within the quarter.”
“The more aggressive pace of investment should alleviate capability constraints as AI demand continues to scale,” Ives added.
Google is certainly one of several Big Tech giants which have teed up major investments in AI infrastructure as they race against China – and one another – to develop advanced models.
Investors feared that DeepSeek’s ultra-efficient model signaled that US tech giants had wildly overspent on chips and other AI infrastructure.
Nonetheless, Meta and Microsoft each doubled down on their spending plans in earnings calls last week – with executives and analysts alike asserting that access to data centers and advanced chips could be an important advantage over time.
With Post wires
