Why Alphabet Is Raising Its AI Spending

Alphabet reported strong fourth-quarter results and said it will increase its capital spending sharply this year. The company plans to invest between $175 billion and $185 billion to expand servers, data centers and networking for artificial intelligence. Revenue for the quarter was $113.83 billion, and net income rose to $34.45 billion, a roughly 30 percent increase. These results were driven in part by Google Cloud, which grew to $17.7 billion on 48 percent growth.

Although investors welcomed higher sales and profit, some were worried about the size of the new spending plan. Share prices fell in after-hours trading while analysts calculated the cost and timing for new investments. Company executives have signaled that much of the capital will fund technical infrastructure for AI and cloud services, and they have emphasized the need to meet customer demand. Since the investments will be large and long-term, the company expects higher depreciation and operating costs in future quarters, but it also expects to support new AI products and cloud growth. Executives noted that cloud capacity bottlenecks have increased demand for servers and GPUs, and that the spending aims to close that gap while enabling more enterprise AI services.