Alphabet Inc. has said it will invest approximately $75 billion this year in expanding its data center capacity despite rising concerns over U.S. tariffs and the ballooning costs associated with artificial intelligence (AI) infrastructure.
The tech giant made the announcement on Wednesday during its annual Google Cloud conference, where CEO Sundar Pichai emphasized that the capital expenditure would fund key infrastructure, specifically chips and servers, to power Alphabet’s core services like Google Search and support the ongoing development of its AI capabilities, including its Gemini model.
“The opportunity with AI is as big as it gets,” said Pichai, who made an unexpected appearance at the event.
Concern over investment
The scale of Alphabet’s planned capital spending was nearly 30% higher than analysts had initially forecast, raising eyebrows among investors wary of AI’s long-term return on investment, especially amid macroeconomic volatility and political uncertainty stemming from U.S. trade policy.
- Investors are particularly concerned about the implications of U.S. President Donald Trump’s evolving tariff stance, which could increase the cost of importing key hardware components.
- Alphabet acknowledged the challenge but signaled that robust customer demand continues to justify the outlay.
“We’re all processing what’s happening with tariffs. But we continue to see strong demand that warrants the investment,” said Sachin Gupta, VP and GM of Google Cloud’s infrastructure division.
Trump announced on Wednesday a temporary easing of some newly imposed tariffs while intensifying pressure on Chinese imports—a move that triggered a significant rally in tech stocks.
Alphabet’s shares surged nearly 10%, contributing to a collective $1.5 trillion gain in market capitalization among the so-called Magnificent Seven tech firms.
Other tech majors ramping up AI spending
Mark Zuckerberg’s Meta Platforms has projected AI-related capital expenditure of up to $65 billion this year.
- Earlier in the year, Microsoft had also announced plans to invest approximately $80 billion in AI-enabled data centers to train AI models across the globe.
- The Vice Chairman and President of Microsoft, Brad Smith, who disclosed this in a blog post highlighted the company’s commitment to AI as part of a broader strategy to respond to China’s daring moves in the tech space.
While highlighting the growing competition between U.S. and Chinese AI technologies, particularly in developing nations, Smith emphasized the need for a proactive international strategy to ensure the U.S. maintains its edge in the global AI landscape.
- According to him, the advent of generative AI has intensified competition, particularly with China’s rapidly advancing AI sector.
- He compared this race to the evolution of the telecommunications industry over the last two decades.
- Smith noted that Chinese companies, with substantial government subsidies, overtook Western counterparts in telecommunications, creating dependencies that posed challenges to U.S. national security.
He said China is now replicating this strategy in AI by subsidizing access to critical technologies like chips and promising to build local AI data centers in developing nations. The strategy aims to lock these nations into China’s AI ecosystem for the long term.
