Alphabet faces scrutiny on AI spending as Google cloud growth slows

Alphabet, the parent company of Google, is facing scrutiny from investors over its massive spending on artificial intelligence (AI). The company's capital expenditure on AI is estimated to have been around $50 billion last year, with even more planned for 2025 . This increased spending is aimed at supporting Google's cloud expansion and AI-driven search features, which are crucial for defending its market share and attracting more ad revenue.

However, the slowdown in Google Cloud's growth has raised concerns among investors. Despite expectations of a 32% rise in revenue in the fourth quarter, the cloud business is expected to decelerate due to high expectations and rising competition. This slowdown, combined with the massive spending on AI, has led to questions about the sustainability of Alphabet's growth trajectory.

Alphabet's shares have risen about 7% this year, driven by increasing investor confidence in its AI bets. However, the company faces intense competition from other tech giants, including Microsoft and Amazon, which are also investing heavily in AI.

The pressure on Alphabet to deliver strong results is mounting, and the company's earnings report will be closely watched by investors. As Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted, "Sustaining this balancing act will be a critical and investors will want to see evidence of this

https://www.reuters.com/technology/alphabet-faces-scrutiny-ai-spending-google-cloud-growth-slows-2025-02-03/