Alphabet Inc. has announced plans to invest approximately $75 billion in expanding its data centre capacity this year, despite mounting concerns over U.S. tariffs and rising costs associated with artificial intelligence (AI) infrastructure.
The tech giant made the announcement on Wednesday during its annual Google Cloud conference, where CEO Sundar Pichai emphasised that the capital expenditure would be allocated to key infrastructure, particularly chips and servers, to power Alphabet’s core services, including Google Search. It will also support the ongoing development of its AI capabilities, such as the Gemini model.
“The opportunity with AI is as big as it gets,” said Pichai, who made a surprise appearance at the event.
Concern Over Investment
The scale of Alphabet’s planned capital spending is nearly 30% higher than analysts had initially forecast, raising concerns among investors who are wary of the long-term returns on AI investments. These concerns are particularly pronounced amid macroeconomic volatility and political uncertainty stemming from U.S. trade policy.
Investors are particularly focused on the implications of U.S. President Donald Trump’s evolving tariff stance, which could increase the cost of importing essential hardware components. Alphabet acknowledged this challenge but indicated that strong customer demand continues to justify the significant investment.
“We’re all processing what’s happening with tariffs. But we continue to see strong demand that warrants the investment,” said Sachin Gupta, Vice President and General Manager of Google Cloud’s infrastructure division.
In a related development, President Trump announced on Wednesday a temporary easing of some newly imposed tariffs while intensifying pressure on Chinese imports. This move triggered a significant rally in tech stocks, with Alphabet’s shares surging nearly 10%, contributing to a collective $1.5 trillion gain in market capitalisation among the so-called Magnificent Seven tech firms.
Other Tech Majors Ramp Up AI Spending
Alphabet’s investment plans are in line with those of other tech giants, who are significantly increasing their AI-related capital expenditure. Meta Platforms, led by Mark Zuckerberg, has projected AI-related capital spending of up to $65 billion this year.
Earlier in the year, Microsoft also revealed plans to invest approximately $80 billion in AI-enabled data centres to support the training of AI models globally. Brad Smith, Vice Chairman and President of Microsoft, highlighted the company’s commitment to AI as part of a broader strategy to respond to China’s growing influence in the tech space.
Smith pointed out that the rise of generative AI has intensified competition, particularly with China’s rapidly advancing AI sector. He compared the current situation to the evolution of the telecommunications industry over the last two decades, where Chinese companies, backed by substantial government subsidies, overtook their Western counterparts. This shift has created dependencies that pose challenges to U.S. national security.
Smith warned that China is replicating this strategy in AI, subsidising access to critical technologies like chips and promising to build local AI data centres in developing nations. This approach is aimed at locking these nations into China’s AI ecosystem for the long term.