Alphabet brushes off DeepSeek fears with mammoth $75B capex spend

DeepSeek crashed Nvidia’s stock last week based on speculation that its cheaper AI models would dramatically decrease Big Tech’s spending on things like data centers and GPUs.

But Alphabet has joined Meta in doubling down on AI spending, pledging to spend $75 billion on capital expenditures this year to accelerate its AI ambitions — well over analyst estimates of $59 billion. 

“We are confident about the opportunities ahead, and to accelerate our progress, we expect to invest approximately $75 billion in capital expenditures in 2025,” CEO Sundar Pichai said during the company’s earnings results.

Alphabet spent about $52 billion in capex for 2024, according to Reuters, so the new number represents a huge 42% increase.

Both Meta and Alphabet are betting that cheaper AI will massively boost demand for their services, rather than making it basically free for everyone and threatening their business models.

Sundar praises DeepSeek but says Gemini’s just as cheap 

While Alphabet CEO Sundar Pichai praised DeepSeek in the company’s latest earnings call, he says Google Gemini has models that are just as efficient.

“First of all, you know, I think it’s a tremendous team. I think they’ve done very, very good work,” Pichai said about DeepSeek. 

But he then added that Gemini’s flash models are “some of the most efficient models out there, including comparing to DeepSeek’s V3 and R1.”

Pichai argued that the rise of cheaper AI globally would only increase its adoption and that Google was well set up to benefit thanks to its billions of users.

Meta CEO Mark Zuckerberg made similar comments in Meta’s earnings call last week. 

Google may integrate ‘follow-up questions’ into Search

Sundar Pichai said that Google has a lot more innovations to Search coming this year, specifically, making the product more interactive.

“I think as you make search… As you make it more easy for people to interact and ask follow-up questions, etc, I think we have an opportunity to drive further growth.”

Sounds like Google Search is becoming more like an AI chatbot!

The company said Google Search was up overall year-over-year while Search’s AI Overviews were popular with “younger” users.

Sundar hints that Project Astra and Deep Research are coming to Search

When asked how Google Search will evolve around AI, Alphabet CEO Sundar Pichai asked everyone to look to some of DeepMind’s research projects around multimodal AI and agents.

“I think we’ll continue bringing AI in more powerful ways, in multimodal ways, things like what we’ve done with Lens, Circle to Search. You can imagine the future with Project Astra. You can also imagine areas like we have done in Gemini Deep Research.”

That means, one day, Google Search might be able to process live video with Project Astra, or generate long research reports with Deep Research.

‘Stay tuned’ for Google AI model updates tomorrow

The earnings call is off, and they’re talking about AI first.

CEO Sundar Pichai says that Gemini 2.0 Flash, which first rolled out in the Gemini app, is rolling out to developers and customers tomorrow.

He also says to expect “other model updates” tomorrow, telling everyone to “stay tuned.” Perhaps that’s Gemini 2.0 Pro Experimental, which developers have found traces of in the changelog to the Gemini app in recent weeks.

Earnings are out: Google Cloud revenue missed

The headline so far is that Google Cloud brought in $11.96 billion in revenue during the last quarter, missing analyst estimates of $12.19 billion.

As we noted below, Google has seen major growth in its Cloud division during the AI boom. The disappointing Cloud revenue could mean that AI companies are choosing Microsoft or AWS for cloud workloads, or that the AI industry more broadly is slowing down spending on compute.

Either way, not a good sign for Google.

Google drops pledge to not use AI for weapons

Just a few hours ago, Google removed a pledge saying it won’t use AI for weapons or surveillance from its AI principles webpage. Keep an eye out for any mentions of military contracts or work with governments on the earnings call.

What analysts are predicting for Alphabet’s earnings

Alphabet will report its fourth-quarter earnings once the market closes, and analysts seem to be quite positive on the stock. According to Investopedia, 15 out of 19 analysts have issued “buy” or equivalent ratings and predict a price target of roughly $219. That could set Alphabet on track to close at an all-time high today.

For more context, our friends at Yahoo Finance broke down how Alphabet stock has performed post-earnings over the past two and a half years.

AI in focus

Everyone will be watching Google’s AI efforts today. Google stunned investors and analysts during its last earnings by posting an impressive boost to its cloud business, largely driving by AI companies buying its computing power and cloud services.

Microsoft and AWS have started hosting DeepSeek’s AI models, which have grown quite popular in the last month, and it’ll be interesting to see if Google Cloud does the same.

Otherwise, we’ll be looking for any hints around Google DeepMind’s homegrown AI models, such as the much anticipated Gemini 2.0 Pro model, or any updates around Project Astra, the company’s multimodal AI effort.

Google may face questioning over China probe and Trump tariffs

Keep an eye out on Google’s earnings call for questions about China’s antitrust probe into the search giant. The investigation was announced on Monday night, just hours after President Donald Trump imposed a 10% tariff on Chinese goods.

This seems to be part of China’s broader retaliation effort to Trump’s tariffs, in which it’s targeting several large U.S. companies. The search giant has a fairly limited presence in China; Google Search is blocked there, and the country makes up only 1% of its global revenue, according to Reuters.

That said, a China probe creates new legal headaches for Google, and complicates the company’s political relationship with the Trump administration.

It’s earnings day at Alphabet

Google parent company Alphabet is reporting its fourth-quarter earnings today after the closing bell. The stock has been riding high over the past month as investors grew bullish over Google’s AI investment, including the release of Gemini 2.0 with multimodel features and its quantum computing chip, Willow.

Expect the company to be questioned on how these efforts will ultimately pay off to have an impact on Alphabet’s ROI, particularly in the wake of DeepSeek’s advances.

Alphabet investors also typically want to know about Google’s cloud computing business and Google’s ads business — both of which are also affected by AI.