Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

paxys

These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.

kibwen

Keeping in mind that Alphabet is the only one of the Mag 7 stocks that has managed to outperform the S&P 500 in 2026.

FartyMcFarter

Why does it raise alarm? Pretty sure all this spending was planned.

ghoshbishakh

Only google serves its own model - increasing its cloud revenue. The growth chart shows linear increase over time, indicating exponential growth if cloud revenue for google.

ofjcihen

Is this why Google decided to release their article explaining how AI spend makes sense to the plebes?

ChrisArchitect

Some more discussion on source: https://news.ycombinator.com/item?id=49012630

650

I've been seeing quite a few companies juicing short term margins and quarter to quarter maxxing even more than before, one such example: https://x.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 --- As someone who has personally spent $500k / mo+ on Google Ads for years, I can tell you with certainty: This revenue growth in Search is artificial & extremely unhealthy for Google’s business long term Search volumes are declining as legacy search is being increasingly cannibalized by non-monetized LLM queries Google’s response? Manufacture revenue growth via short-sighted, highly extractive, customer-hostile tactics. I.e. charge advertisers more for lower quality clicks, including clicks they do not want and explicitly did not approve Google to charge them for A few examples to illustrate: For all of its history until recently, Google operated on a 2nd price auction model I.e. if you bid $5 CPC and the next highest bidder bids $1 CPC, Google charged you $1.01 for the click (one penny more than the 2nd highest bidder) rather than the $5 you bid This was a genius move by Google early on as it incentivizes advertisers to input their true maximum willingness to pay rather than trying to play the game of bidding low and constantly adjusting to try to stay just ahead of the next highest bidder while still not paying too much However recently, Google silently deprecated the 2nd price auction and began charging advertisers as much as their bid and budget caps allow, regardless of what anyone else is bidding It’s a short-sighted cash grab at the expense of the long term health of the advertiser ecosystem Making thing worse, Google also recently nerfed keyword targeting precision Google previously had precise keyword targeting settings that allowed advertisers pick individual search phrases to bid on, defined down to the character w/ exact match or phrase match targeting This was one of the core features that made search advertising magic, enabling advertisers to run extremely precise campaigns based on exactly what their target customer typed But now, even if you bid on a specific term or phrase using the strictest exact -match targeting settings, Google will show your ad across 1000’s of unrelated keywords, labeling them as as “exact match (close variant)” The definition of “close variant” means whatever they want it to and changes constantly. The result is advertisers get billed for clicks that are totally irrelevant to their business and that their targeting settings explicitly forbid Google from targeting. Google does it anyway and there’s no ability to turn this off So now exact match is broad match, and broad match is just meaningless spam This is all very bad for advertisers, but for Google, it allows them to show your ad and bill you for clicks across 1000x more searches that were previously going unmonetized (mainly because they’re garbage queries no one wants) This is how you grow revenue atop declining search volumes Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day And the extra spend is entirely on the garbage keywords Google arbitrarily throws in as “exact match (close variants)” which have no value to our business, but can’t be turned off Google offers no refunds nor any recourse for overspend or spend on keywords you explicitly did not target These are not the actions of a healthy business. These are the actions of company whose core business is in decline but desperately needs to pump quarterly earnings so Wall Street will continue to fund insane capex while hopefully looking through their rapidly deteriorating negative free cash flow Google operated a benevolent monopoly for the better part of 25 yrs Meaning the value Google captured from Search was but a small fraction of the value it created, and that spread produced a potential energy that justified expectations of high earnings growth far, far into the future This is now no longer the case At the alter of AI capex, Google is sacrificing the golden goose

seydor

Haven't they announced the spending like, years ago? Is the market deaf and blind now too?

epistasis

I'm thinking Apple has been really smart in their AI strategy here. It seems a mistake to make unprecedentedly large capital expenditures, in a very very crowded space, without much evidence of a moat. Presumably people thought the moat would be singularity-like self-improvement of AI, but the singularity is merely a religious concept, and nobody should take religious myth as fact, it's merely narrative for orientation and inspiration.

dev0p

Basically all of Big Tech is betting it all on Red that this whole AI business pays off before they end up losing everything. And I get it, it would be unwise to stay behind and ignore what could very easily turn out to be humanity's greatest invention since pizza. But still, is there seriously no other way to go about it instead of collectively running head first, hands behind at a breakneck pace, while risking the complete collapse of ... well, everything? I suppose not, especially considering it's a technology with potentially massive military and social impact on a global scale, or even beyond that if we're being particularly delusional. Though one has to wonder who will end up paying the tab, and I think that we all know the answer to that.

Zigurd

Looking at cash burn is looking at the wrong end of the horse. Some companies, like Meta, have burned huge piles of cash in pursuit of, for example, the Metaverse and they've got nothing to show for it, not even a slight increment in ad tech, and yet they earned enough to shrug it off. There's a big difference between Google spending tens of billions on AI infrastructure and what Oracle is doing. Oracle is spending to get on a bandwagon. Google is transforming their business, so far seemingly correctly. If AI flops big-time, Google will be left with some stranded assets, but it won't be existential the way it would be to Oracle.

Centigonal

They just raised $85 billion and they're sitting on a mountain of cash - if their spending didn't increase in this context, it'd be bad management. The real story here is that they have decided to spend that mountain of cash on AI CapEx.

flerchin

Profit is up 20% YoY. Google is a money printing machine, and they printed over $40B last quarter. Are you kidding me.

gavin_gee

i dont understand the concern. they are putting up great financials. you have to invest ahead of the outcome. this is just classic quarterly public company earnings BS, where public markets dont reward innovation investment. they just want crank the handle financials. The bigger issue is on the model front, can Google compete; Gemini doesnt seem to be able to compete on the heavy expert end; they are doing well on lighter faster models.

infecto

It could absolutely harm their long term value but keep in mind Alphabet and the other hyperscalers are generally flush with cash. Is this a lot of debt? Absolutely but the businesses are generating a lot of cash too.

bethekidyouwant

Oh no a company spending money is bad for the economy… especially since they are spending it on … the most advanced tech humanity has ever created…

tedggh

The current commitment by hyperscalers is around 1.7T USD, reported liabilities 1.3T and this year global debt related to AI is 570B. So that’s around 3T total. For this to make sense AI must generate 2T in new revenue per year by the end of the decade. And that would be only a 10% ROIC. For context ROIC for big tech is around 35% so at 10% they will be barely breaking even. The SP500 gives 10-12%. With 10% ROIC from AI the only thing investors will be celebrating is that the whole thing didn’t trigger a financial crisis. Data centers are NOT real estate. Buildings and power lines usually last 30-50 years. GPUs become obsolete in 5 years. If hyperscalers need to refinance and their interest rate goes up there’s zero margin for error.

everyone

GOTTA BUY THOSE TULIPS!!

khurs

How does this spend affect Google CEO's $692 Million potential pay? Is it meeting the required goals or taking him away from them? https://fortune.com/2026/03/10/google-ceo-sundar-pichai-692-...

dmix

So tired of media doomposting and exaggerating everything.