Is Google Ready to Lead the AI Race?

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•  04 Feb 2026
 

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$GOOGL Alphabet has once again captured Wall Street attention with a blockbuster fourth-quarter report. The tech giant exceeded revenue expectations, posting $113.8 billion, up 18% from last year, while earnings per share soared to $2.82, well above forecasts. Yet despite the strong numbers, shares dipped nearly 5% in after-hours trading, reflecting investor caution over Alphabet unprecedented capital spending.

This year, Alphabet plans to invest between $175 billion and $185 billion in capital expenditures, mostly focused on artificial intelligence infrastructure, far exceeding analysts’ prior estimates of $115–$120 billion. The bold move highlights the intensity of the AI arms race among tech titans, including Microsoft, Amazon, and Meta, all investing heavily to secure long-term dominance, even at the risk of near-term profit pressures.

Alphabet strategy hinges on expanding data centers, computing infrastructure, and proprietary chips to accelerate Google Cloud growth and support advanced AI models. The launch of Gemini 3 in November has already positioned the company alongside AI leaders such as OpenAI and Anthropic, signaling a leap forward after a period where Google seemed behind in AI innovation. User adoption metrics are impressive: the Gemini app now exceeds 650 million monthly users, while the AI Overviews feature in Google Search reaches over two billion users per month, proving AI can integrate without disrupting Google core search revenue.

Strategic partnerships also bolster Alphabet AI ambitions. A recent collaboration with Apple ($AAPL) will see Gemini models power the next version of Siri, potentially reaching more than 2.5 billion Apple devices worldwide. Alphabet is further solidifying its AI infrastructure role by supplying up to one million dedicated TPU chips to Anthropic, strengthening its presence not just in model development but also in the underlying AI ecosystem.

Despite these promising developments, investors remain watchful. Roughly 75% of Alphabet revenue still comes from advertising, and the market wants reassurance that AI integration will enhance rather than dilute this core model. Google Cloud is also under the spotlight, with forecasts projecting $16.2 billion in revenue for the quarter, representing 35% year-over-year growth and improved operating margins. Continued momentum here will be essential to justify the massive capital outlay.

Alphabet ambitious AI investments signal a transformative phase for the tech giant, but they also raise critical questions for traders and investors: Can Google translate this spending into sustainable growth? Will AI-driven products secure long-term profitability? The coming quarters will provide clarity, but for now, Alphabet $185 billion bet keeps the market watching closely.

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