When the sector expands rapidly, there is fear of investment. A booming stock price and aggressive spending will inevitably make you feel good until it cools down. Next comes the calculation.
Big Tech is part of AI Arms Race, with companies looking to outperform others in their data centers, GPUs, networking gear and talent. Engineers can let go. But infrastructure? It is permanent. If your AGI dreams fade, you are stuck with huge and expensive assets.
That's why Google announced that it had raised eyebrows for 2025, rising from $10 billion to $85 billion. Most of it is for things you can't go back to: chips, data centers, networking.
Google “is hoping on the AI Crazy Train,” written by Bernstein analyst Mark Shmulik, referring to the song of the late Bat Biter Ozzy Osbourne.
Mark Zuckerberg of Meta boasts about his Manhattan-sized data center. And Elon Musk continues to stock up on GPUs. Sam Altman is building a Megadata Centre with his partner. JPMorgan is known as this “atmosphere spending” and could burn $46 billion over four years to Openai.
When it comes to Elon, Zuck, and Sam Flex on Capex, that's not a shock. But Google? That's amazing. “Google isn't doing this,” Shmulik said. The company has been considered measured in recent years and carefully prioritizes the strength of its investment. There's no more.
Now investors want to know: Will these inflation bets pay off?
There are promising signs. Since May, Google's monthly token processing (generated AI currency) has almost doubled from 480 trillion units. Searches rose 12% in the second quarter, breaking forecasts. Cloud sales skyrocketed by 32%. CEO Sundar Pichai said Google is increasing CAPEX to support all this growth.
But it's still a huge gamble. “The current rate of return on investment capital seen in both search and cloud is [capex] The strength level is “Shmulik asked,” and “Are there any very expensive gum fragments trying to insert an AI-sized hole?” he leaned optimistically.
Still, Google's shares rose just 1% after these results. To be precise, it's not overwhelming support.
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