Alphabet AI Investment Boost Drives Cloud Demand

3 months ago

"Tech standout this morning. You want to guess what it is? Yes. Alphabet reporting, a surge in demand for the cloud and artificial intelligence services for the quarter just ended. So that's pleasing investors. They sent the shares up even as the company said that capital spending for the year will be higher than expected. So third quarter sales. This is when you strip out the the partner payouts rose to 87 and a half billion dollars. The company is investing record amounts to try to push progress in AI and infuse answers in assistance from the large language model that it has Gemini into some of the popular products, including search. So the company says CapEx for the year is going to be 91 billion to $93 billion. That's up from the 85 billion of earlier estimates. And what seems to set it apart from Microsoft and Mirror is that Alphabet was able to prove to investors that their spending on artificial intelligence is actually paying off. And John, just put that into context. 90 billion of CapEx this year, in 2021, they had 25 billion in CapEx. So just a huge ramp up. Enormous investors, they've been clamoring for this evidence revenue from products built on Google's generative A.I. models. Here it is grew more than 200% from a year earlier. So the investment in infrastructure research is really paying off at this point. And we're actually seeing a divergence in divergence in terms of the equity market trade right now. Shares of Google up about 8%, but metal down more than 10% right now."

Alphabet reported strong quarterly growth driven by a surge in demand for cloud and AI services. The increased capital expenditure forecast of $91-93 billion underlines a strategic ramp-up in AI investments, which has resulted in over 200% growth in revenue from its generative AI models, lifting shares by around 8%.

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