On its second quarter earnings call, Alphabet said its increase in capital spending was "driven overwhelmingly by investment in our technical infrastructure, with the largest component for servers, followed by data centres." It expects total capital spending to be about 48 billion dollars in 2024.
On that call, Sundar Pichai, CEO Alphabet and Google, added: "Aggressively investing upfront in a defining category (AI), particularly in an area, which in a leveraged way, cuts across all our core areas, our products, including search, YouTube and other services as well as fuels growth in cloud and supports the innovative long-term bets and Other Bets. It is definitely something that for us makes sense to lean in."
"The risk of underinvesting is dramatically greater than the risk of over-investing for us here. Even in scenarios where if it turns out we are over-investing, these are infrastructure which are widely useful for us, they have long useful lives, and we can apply it across and we can work through that."
Despite Alphabet's ramp up, Amazon still has by far the biggest capex budget in the Magnificent Seven, reflecting the fact that it runs a massive logistics business, in addition to its cloud services and apps. After cutting investment sharply in 2023 (through lower spending on fulfilment and transportation), Amazon has said it will increase capex in 2024 to support growth in its cloud computing business (AWS), which is investing in generative AI and large language models.
Source: The Magnificent Seven - Follow the Money
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