LAS VEGAS: Alphabet said on Wednesday it was still committed to spending some $75 billion this year to build out data center capacity despite turmoil over U.S. tariffs and sought to reassure investors that its AI plans were yielding good returns.
Investors are fretting about the massive capital costs of AI projects, especially as uncertainty surrounding U.S. President Donald Trump’s tariffs roil markets and cloud the economic outlook.
CEO Sundar Pichai said the investment would buy the chips and build the servers needed to burnish Alphabet’s core offerings, including Search, while supporting the development of AI services such as its Gemini model.
“The opportunity with AI is as big as it gets,” he said, making a surprise appearance at the company’s annual conference for its cloud computing unit.
Alphabet’s planned capital outlay, first unveiled in February, was 29% higher than what analysts had expected at the time.
Asked about the potential for U.S. tariffs to raise the cost of building data centers, Sachin Gupta, vice president and general manager for Google Cloud’s infrastructure unit, said the cost of importing hardware might climb but customer demand continued to necessitate the increased investment.
“We’re all processing what’s happening with tariffs,” he told Reuters.
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Trump on Wednesday said he would temporarily lower the hefty duties he had just imposed on dozens of countries, while further ramping up tariff pressure on China. Alphabet’s shares closed nearly 10% higher, part of the $1.5 trillion gains in market value for the “Magnificent Seven” tech stocks.
A Microsoft executive this week in a LinkedIn post also re-emphasized the company’s plans to spend more than $80 billion on AI infrastructure in 2025. Meta Platforms has said it would spend as much as $65 billion.
AI represents one of two key areas, alongside cybersecurity, where enterprises have stayed the course on investments despite macroeconomic uncertainty, said Chiraj Mehta, principal analyst at Constellation Research.
“Early success from customers who have chosen Google Cloud as their preferred AI platform is reinforcing the case for continued aggressive investment,” he said.
Customers including TurboTax maker Intuit, pizza maker Papa John’s and Verizon spoke at the conference about how AI was helping their businesses.
Intuit was “doubling down” on plans to integrate AI into its financial services software, its chief data officer Ashok Srivastava said.
Kevin Vasconi, Papa John’s chief digital officer, said he didn’t see any slowdown in the firm’s AI spending, adding “I can get a better return on an AI-based project than I can with any other project right now.”
Verizon said earlier this week that an AI assistant for the company’s customer service representatives built using Google models had cut down on call times and freed them up to sell products to customers, leading to a surge in sales.
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