Google's $75B AI Bet: Accelerating Innovation, Strengthening Core Businesses

Google CEO Sundar Pichai has announced that the company plans to invest approximately $75 billion in capital expenditures in 2025, with a significant portion of that budget allocated to artificial intelligence (AI) initiatives. This investment represents a 43% increase from the firm's 2023 capital expenditures of $32.3 billion.

Pichai stated that this substantial investment will accelerate progress in AI innovation and further strengthen Google's core businesses. Capital expenditures, often referred to as "capex," are funds used to purchase long-term physical or fixed assets in business operations. While it's not clear exactly how much of the investment is earmarked for AI, it is expected that most of it will be funneled into expanding Google's AI infrastructure.

Google's commitment to AI is not surprising, given that AI has been one of the company's strongest revenue streams in recent years. Overall revenue for Google was up 12% year-over-year at $96.5 billion, while Google Cloud revenue jumped 10% to $12 billion. This growth was supported by consistent growth across core Google Cloud Platform products, AI Infrastructure, and Generative AI Solutions.

However, 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. Despite this, Pichai downplayed the risks posed by new competitors, including the China-based AI model DeepSeek, which shook the market in late January.

In a Feb. 4 investor call, Pichai highlighted the efficiency of Google's Gemini 2.0 Flash models, comparing them favorably to DeepSeek's v3 and R1 models. DeepSeek had previously spooked US markets with news that its developers were able to produce a worthy competitor to American AI firms such as OpenAI at a fraction of the cost, using a shoestring budget of just under $6 million and less advanced hardware from semiconductor manufacturer Nvidia.