Alphabet announced on Wednesday that it remains dedicated to investing around $75 billion this year to expand its data centre capacity, despite the chaos caused by U.S. tariffs, and aimed to reassure investors that its AI initiatives were producing positive results. Investors are worried about the huge financial expenses of AI initiatives, particularly as uncertainty over U.S. President Donald Trump's tariffs disrupts markets and obscures the economic forecast.
CEO Sundar Pichai stated that the investment would acquire chips and construct servers necessary to enhance Alphabet's main services, including Search, while also aiding the advancement of AI services like its Gemini model.
Alphabet Doubles Down on AI
"The potential with AI is immense," stated Pichai unexpectedly at the annual conference for the company's cloud computing division. Alphabet's intended capital expenditure, initially revealed in February, was 29 per cent above what analysts had anticipated then. When asked about the possibility of U.S. tariffs increasing data centre construction costs, Sachin Gupta, vice president and general manager of Google Cloud's infrastructure division, stated that while importing hardware might become pricier, customer demand still requires greater investment. "We're all trying to understand the situation with tariffs," he told Reuters.
On Wednesday, Trump announced that he would temporarily reduce the significant tariffs he recently enacted on numerous countries while increasing tariff pressure on China. Alphabet's stock finished almost 10 per cent up, contributing to the $1.5 trillion increase in market value for the "Magnificent Seven" technology companies. This week, a Microsoft executive reiterated in a LinkedIn post the company's intention to invest over $80 billion in AI infrastructure by 2025. Meta Platforms announced that it plans to invest up to $65 billion.
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According to Chiraj Mehta, principal analyst at Constellation Research, AI is one of the two main sectors, together with cybersecurity, in which companies have maintained their investments despite economic uncertainty. "Initial achievements from clients selecting Google Cloud as their favoured AI platform are strengthening the argument for sustained robust investment," he stated.
Clients such as Intuit, the creator of TurboTax, pizza chain Papa John's and Verizon discussed at the conference the ways AI was benefiting their operations. Intuit was 'reinforcing' its commitment to incorporate AI into its financial services software, stated its chief data officer, Ashok Srivastava.
"I can achieve a better return on an AI-driven project than with any other project at this moment," stated Kevin Vasconi, the chief digital officer at Papa John’s, who revealed that he hasn't observed any decrease in the company's AI expenditures. Earlier this week, Verizon announced that an AI assistant designed for its customer service agents, utilising Google models, had reduced call durations and allowed representatives to focus on selling products, resulting in increased sales.
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