Alphabet raises AI investment as hyperscalers face scrutiny on capital expenditures
Alphabet has raised its 2026 capital expenditure forecast by $15 billion, signaling increased spending in the race for artificial intelligence dominance. This move comes amid investor pressure to justify infrastructure investments with monetization or clear visibility toward returns. The company's free cash flow turned negative for the first time due to these higher costs, despite a strong 82% year-over-year increase in Google Cloud revenue. The market reaction has been mixed: Alphabet’s stock fell nearly 8% over five days following earnings and continued downward pressure on hyperscalers like Meta Platforms (-7%) and Amazon (-6%). Microsoft is also underperforming. With Meta, Amazon, and Microsoft set to report next week, investors will closely watch their capital spending guidance and free cash flow performance. Jeff Marks of Club portfolio notes that capex trends are now the top focus for Big Tech earnings as companies balance growth with financial sustainability.
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Topics: AI investment Big Tech earnings capex trends free cash flow