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Alphabet's AI Bets Spark Spending Fears
23 Jul
Summary
- Alphabet shares fell below the 100-day moving average for the first time since April.
- Q2 capex was $44.9 billion, and full-year guidance was raised significantly.
- Google Cloud revenue surged 82% to $24.8 billion amid AI infrastructure demand.
Alphabet, which had been a top performer among the "Magnificent Seven" stocks, is now facing investor scrutiny regarding its spending. The company's shares dipped below the crucial 100-day moving average on Wednesday, their first such occurrence since April. This downward trend accelerated in premarket trading on Thursday as concerns mounted over Alphabet's capital expenditure (capex) plans.
In the second quarter, Alphabet's capex reached $44.9 billion, exceeding Wall Street's expectations. Furthermore, the company boosted its full-year capex guidance to between $195 billion and $205 billion, up from the previous $180 billion to $190 billion range. Executives also indicated a substantial increase in spending planned for 2027.
Despite these spending concerns, Google Cloud reported impressive results, with revenue soaring by 82% to $24.8 billion. The company's cloud backlog also expanded significantly, reaching $514 billion, highlighting robust demand for AI infrastructure. CEO Sundar Pichai emphasized the strong performance across AI products like Search, YouTube, and Gemini, underscoring the continued scaling of its AI ecosystem.
Analysts believe that the intense investor focus on hyperscalers' capex will likely lead Alphabet's stock to test its 200-day moving average. This period marks a critical juncture for the tech giant as it navigates substantial investments in artificial intelligence.
