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Google parent Alphabet’s stock plunged by more than 8% — wiping out more than $200 billlion in market value — after the search giant unveiled plans for a massive 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 less 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 would erase all of Alphabet’s stock gains since the start of the year.
CEO Sundar Pichai said Google would spend a whopping $75 billion on capital expenditures in 2025 alone – up from $52.5 billion last year and much higher than the number expected by analysts.
“If this is the new trend for Alphabet, then investors should be worried,” said D.A. Davidson analyst Gil Luria.
Pichai said that DeepSeek had done “very, very good work” but asserted that Google’s AI products were “some of the most efficient models out there.” He also defended Google’s spending plans.
“The cost of actually using [artificial intelligence] is going to keep coming down, which will make more use cases feasible,” Pichai added. “And that’s the opportunity space.”
Revenue from Alphabet’s cloud-computing division rose 30% — less than the 35% jump from the company’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 slightly 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 capacity in the quarter.”
“The more aggressive pace of investment should alleviate capacity constraints as AI demand continues to scale,” Ives added.
Google is one of several Big Tech giants that have teed up major investments in AI infrastructure as they race against China – and each other – 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.
However, 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 would be a crucial advantage over time.
With Post wires
