Google to invest $75 billion in 2025 to expand AI infrastructure

Google has said it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected. Investors expressed concern regarding a missed cloud revenue target and are demonstrating growing impatience regarding profitability.

When asked about the huge spending bump on a conference call with analysts, Google CEO Sundar Pichai discussed these developments. He noted that Google’s Gemini family of AI models is nearly as energy-efficient as DeepSeek.

Analysts are now questioning Google and US competitors’ capital spending after the rise of China’s DeepSeek, which is a lower-cost AI model. 

Alphabet sets aside massive investment for AI growth  

Alphabet has been investing substantially in infrastructure development to support AI research and its integration into products like search and cloud services. The $75 billion figure slated for expenditures in 2025 represents a 43% rise from the company’s $32.3 billion capital expenditures in 2023.

Pichai indicated that this investment will “accelerate progress” in AI innovation and further reinforce the company’s primary businesses.

Chief Financial Officer Anat Ashkenazi said on the call that the majority of capex for 2025 would go into building servers and data centers. She partially attributed the fourth-quarter results to capacity constraints on cloud AI offerings. Capital expenditures — also known as “capex” — are funds allocated for acquiring long-term physical or fixed assets for business operations.

Alphabet expects to spend about $18 billion in the first quarter. This figure is by far the largest compared to the roughly $6 million DeepSeek said it spent on the final training run to develop its AI model.

While the precise allocation of the investment for AI remains unclear, it is anticipated that the majority will be used to expand Google’s AI infrastructure. Other major technology companies have increased spending on AI-related projects, including Meta, which said it would spend $65 billion to expand its AI infrastructure.

Google Cloud sees growth, despite revenue miss

AI has been among Google’s most reliable revenue sources in recent years, with total revenue increasing 12% year-over-year to $96.5 billion.

Concurrently, Google Cloud revenue increased by 10% to $12 billion during the same period, a growth Google attributed to consistent performance across “core Google Cloud Platform products, AI Infrastructure, and Generative AI Solutions.”

Still, Alphabet’s total revenue fell short of combined analyst expectations of $96.7 billion, and its share price fell more than 7% in after-hours trading.

During a February 4 investor call, Pichai downplayed the potential risks presented by emerging competitors, notably DeepSeek, the China-based AI model that disrupted the market in late January.

Pichai informed those on the call that Google’s Gemini 2.0 Flash models are “among the most efficient models available,” even when benchmarked against DeepSeek’s v3 and R1 models.

On January 27th, DeepSeek surprised US markets by announcing that its developers had created a comparable competitor to US AI companies like OpenAI at a significantly lower cost.

The company reports developing its AI model on a very limited budget of just under $6 million, using less sophisticated hardware from semiconductor manufacturer Nvidia.

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