Google’s Capex Crunch: Can AI Growth Outpace Spending Strain?

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(SeaPRwire) –   By: Oliver Hawthorne

Google’s stock is taking a beating once more, and this time it’s the company’s capital expenditure (capex) that’s the main thorn in investors’ sides. Alphabet shares plummeted 3.5% in premarket trading on Thursday, extending a losing streak to a third straight session. Revenue for the quarter was a bright spot, surging 24% to $119.8 billion, which easily topped the $116.93 billion analyst estimate. But the cloud overhanging the stock? Alphabet sharply raised its 2026 capex forecast to between $195 billion and $205 billion, up from the prior range of $180 billion to $190 billion.

Q2 capex clocked in at $44.92 billion, nearly double the year-ago figure. That spending led to negative free cash flow of $5.9 billion, the first such red ink since the company went public in 2004. Even as Google Cloud notched 82% revenue growth and its contracted backlog spiked fivefold, the market is fixated on the hefty investment in data centers and computing capacity. Alphabet shares had already dropped nearly 3% over Tuesday and Wednesday. Class A shares closed Wednesday at $342.09, then traded near $327.20 early Thursday, with spending concerns remaining the dominant narrative.

Cloud growth tells a promising story. Google Cloud’s revenue soared 82%, and enterprise demand is surging. Morningstar noted Alphabet’s “real progress in artificial intelligence monetization” across various segments. CEO Sundar Pichai highlighted Gemini reaching 950 million monthly active users and model interfaces processing 22 billion tokens per minute. Yet, the stock’s woes persist because even strong operating results can’t fully offset the impact of enlarged capex. Search revenue rose 17%, and AI Mode had over a billion monthly users, but the market is weighing current cash outlays against future AI-driven revenues.

Retail traders are stepping in to buy the dip, citing growth across search, cloud, AI, YouTube, and autonomous driving. But the capex picture remains stark. The 200-day exponential moving average near $319.32 is a key support, but immediate resistance sits at $345, and a stronger recovery barrier at $355 to $358. For now, Google’s stock is on track for a third weekly decline, with spending concerns overshadowing AI’s potential. Unless capex slows meaningfully, the stock may continue to face headwinds despite solid business fundamentals.

Author bio: Oliver Hawthorne, Principal Correspondent at an international technology review, specializing in dissecting hardware investments and cloud infrastructure dynamics in the tech sector.