Alphabet Inc’s first cash burn on record has jolted investors awaiting more Big Tech results next week as soaring artificial intelligence (AI) spending strains one of the world’s most profitable companies, and the pain is only expected to increase.The Google parent burned US$5.9 billion in the second quarter, even as the cloud unit that rents out AI computing power notched a record 82 percent growth. With Alphabet now expected to spend US$15 billion more this year and predicting another increase next year, the outlays behind the cash burn will only rise.The cash hit is one of the clearest signs of how AI is reshaping Big Tech. Once prized for fat margins and cash gushers that could easily fund new bets, the group is now leaning on debt and share sales to bankroll spending, which is set to top US$700 billion this year as their cash flows fall short.
The Google signage is pictured outside the company’s headquarters in Mountain View, California, on Tuesday.
That will sharpen scrutiny when Microsoft Corp, Meta Platforms Inc and Amazon.com Inc report results next week amid investor concerns that the other tech giants will likely follow Alphabet by raising spending forecasts despite payoffs lagging the pace of outlays.“The risk is tilted towards further increases, particularly while Microsoft and others remain capacity-constrained,” Saxo Markets chief investment strategist Charu Chanana said.
