Shares of Google’s parent Alphabet dropped after the company said it would double capital expenditures this year, indicating another significant push to strengthen its position in the AI race.
Big Tech companies are projected to invest over $500 billion in AI this year, raising worries among investors over high valuations and expected returns, Reuters reported.
Alphabet shares tumbled 7% to $309.32 at 9:34 am in New York, the biggest intraday drop since May, while the stock has gained about 64% over the last year, Bloomberg reported. The fall in stock prices comes despite Alphabet’s overall revenue in 2025 surging 18% to $400 billion for the first time, Alphabet said, the company said.
Alphabet’s capital expenditure plan
Google’s parent company announced that capital expenditures could reach up to $185 billion this year, significantly higher than the $119.5 billion predicted by analysts. Additionally, fourth-quarter sales, excluding partner payouts, totaled $97.23 billion, exceeding the average estimate of $95.2 billion, according to Bloomberg data.
The expected expenditure for 2026 will exceed the total spent by the internet search giant in the previous three years. However, Chief Executive Officer Sundar Pichai assured investors that these costs are essential. “We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” he said Wednesday in a statement. “Search saw more usage than ever before, with AI continuing to drive an expansionary moment.”
Google Cloud revenue in the recent period rose 48% to $17.7 billion, surpassing the $16.2 billion analysts anticipated, and Alphabet said that Gemini, its artificial intelligence model, is quickly attracting new users.
Alphabet is trying to reshape its business for the AI era, working to ensure consumers continue to visit its search page even when rival chatbots are available. The company has rapidly enhanced its Gemini model and incorporated it into various products, a move that has required huge investment in data centers and chips to improve the model and support cloud customers. It also noted that massive investments in AI, including funding new infrastructure, research and talent, are essential for competing with rivals such as Amazon.com Inc., Microsoft Corp. and OpenAI.
