Bloomberg Businessweek – "Alphabet to Blow Past Investor Expectations for AI Spending"

Date: February 4, 2026
Hosts: Carol Massar, Tim Stenovec
Key Guests: Mandeep Singh (Bloomberg Intelligence), Dan Ives (Wedbush Securities), Jenny Welch (Bloomberg Economics), Axel Merk (Merk Investments)

Overview

This episode centers around Alphabet’s (Google’s parent company) Q4 earnings report, which revealed a massive surge in planned capital expenditures (CapEx) for AI and cloud investments—over $175–185 billion for 2026, far exceeding Wall Street expectations. The discussion branches out to analyze the broader arms race amongst hyperscalers (Alphabet, Microsoft, Amazon), the downstream effects on semiconductor and software companies, and the market’s rapidly changing dynamics. Later segments zoom out to examine U.S.-China relations and the volatile precious metals market.

Alphabet’s AI Explosion: Earnings, CapEx, and Strategic Context

Record CapEx and Surging Revenues

(01:49–07:00)

• Alphabet’s planned CapEx for 2026: $175–185 billion vs. $119.5 billion expected by analysts (02:03, B/D/E)

  • "We're talking 175 to 185 billion in 2026, 119 and a half billion was expected." (02:03, D)

• Year-over-year CapEx growth is nearly double, a dramatic acceleration from $95B in 2025.

• Q4 sales (excluding partner payouts): $97.23B vs. $95.2B expected (02:03), and cloud revenues at $17.66B beat $16.2B estimates (12:55).

• Core strategic insight:

  • Alphabet’s CapEx isn’t just for internal AI needs; unlike Meta, Google can also sell its AI/cloud infrastructure to other enterprises (03:16, D/E).
    • "This is different than Meta, because Google can use this CapEx to then sell to other companies." (03:16, D)
  • Accelerating AI-driven cloud and search revenues; Gemini monthly active users (MAU) hit 750M, exceeding estimates (05:18–05:52).

• AI Usage Metrics:

  • 10 billion API tokens per minute on Alphabet’s AI APIs—shows real-world traction and high utilization by enterprise clients (03:31, E).
  • Search up 17%; Gemini MAU estimate: 750M vs. 650M (05:18, D).

• Personalization Advantage:

  • Google's AI is now connecting the entire family of apps (Gmail, Search, Chrome, etc.) into Gemini, allowing for deeper, more contextual AI assistants—a competitive edge over peers (06:17, E):
    • "The advantage that Google has is their family of apps. And that's why Meta is really building their AI data center capacity." (06:17, E)

• Monetization and Margin Strength:

  • Alphabet’s search business, at a $225B run rate, still commands 70–80% incremental margins—"the envy of the world" in digital advertising (04:49, B/E).

Wall Street Reaction & The Arms Race Among Hyperscalers

Stock Market Jitters and Sector-Wide Impact

(07:00–09:31, 13:31–16:25)

• Markets reacted with high volatility: Alphabet shares first tumbled (-7%), then rebounded, settling lower; meanwhile, Nvidia and Broadcom surged in after-hours trading, reflecting the semiconductor sector’s dependence on AI infrastructure CapEx (07:14, B).

• Dan Ives on the Big Picture:

  • The hyperscalers’ massive CapEx signals a long-term, secular "AI arms race" (08:06, G).
    • "It just further solidifies the spending, the monetization, the cloud, the moves that enterprises are making." (08:06, G)
  • Jitters over whether “CapEx that’s too big?” reflect anxiety, not strategy—the long-term narrative is robust AI/cloud investment (08:47, G).

• Implications for Chipmakers and Cloud Providers:

  • Broadcom and Nvidia stocks moved positively in response to Alphabet’s results (10:25, B).
  • "This is about their chip prowess...three Frontier Labs or companies are using Google's chips. That's a testament to their moat." (10:47, E)
  • Apple's reported use of Google’s chips to power AI Assistant (possibly Siri) signifies Google’s vertical integration strength and catalyzes further CapEx ramping (11:23, E).

• Operating Cash Flow as a Competitive Moat:

  • Alphabet’s core business generates ~$150B in free cash flow, funding these aggressive investments—smaller firms cannot compete at this scale (11:52, E).

• Capacity Allocation:

  • Roughly 30–40% of Alphabet’s AI/compute infrastructure serves the external cloud business; the rest powers their internal apps/family of services and AI training (12:48, E).

Competitive Positioning & Future Efficiency

Who Wins the AI Arms Race?

(13:44–17:39)

• Alphabet’s Odds as an AI Leader:

  • Vertical integration (especially building its own AI chips, TPUs) stands out—reducing dependence on Nvidia and increasing return on CapEx (15:52, E).
    • "They will have a much bigger infrastructure with a much higher ROI just because they are doing their own job." (15:52, E)
  • Alphabet still uses Nvidia chips, but primarily for external cloud; major internal and third-party model training is on custom Google silicon (16:27, E).

• CapEx “How much is too much?”

  • Ongoing supply constraints—no signs yet of overspending, but markets are wary if CapEx ever exceeds operating cash flow (17:01, E; 17:51, E).

• Meta and Others:

  • Meta’s CapEx/investment ability is limited compared to Alphabet, simply because of lower operating cash flow (17:01–17:39, E).

Broader Tech Market Implications

Software’s Future, Chipmakers’ Race, and Investor Takeaways

(18:10–24:20)

• Qualcomm’s Divergent Story:

  • Poor outlook due to weak smartphone demand, despite attempts to compete in AI chips (18:10–19:37).
  • Dan Ives emphasizes Nvidia as the uncontested leader in AI chip technology—everyone else (AMD, Intel, Qualcomm) is trailing (19:58, G).
    • "There's one chip in the world fueling the AI revolution and that's right. And it's led by Godfather [Jensen Huang of Nvidia]." (19:58, G)

• AI’s Impact on Software Model:

  • Concerns surfaced over whether foundation models like Claude and Gemini might disrupt software subscription businesses (Salesforce, LegalZoom, etc.) by providing cheaper/bundled alternatives (22:50, D).
  • Ives pushes back, seeing this as a sectoral headwind but not an existential crisis (23:26, G).
    • "No one, you're not replacing Salesforce with a model like this...black cloud over the sector, but then to some extent now it's in the hands of Benioff, Salesforce, McDermott Service...to prove the monetization." (23:26, G)

• Investor Playbook:

  • The AI/cloud wave is not winner-take-all; hyperscalers, leading chipmakers, and “second-, third-, fourth-derivative” players all benefit (22:06, G).
    • "You cannot get caught up in some of these like weekly or sort of daily gyrations. You got to understand where the story's going and the story [is] solidified." (22:13, G)

Global Macro Snapshots

U.S. & China: The New World Order

(27:12–32:38)

• Trump & Xi’s Recent Call:

  • Discussed trade, military, Iran, and global hot spots (27:12, B/D).
  • Analysis suggests U.S. may be trying to urge China to influence Iran, while China remains noncommittal, focused on its own interests—particularly oil and strategic leverage (28:44, H).

• China’s Strategic Positioning:

  • Beijing sees current U.S. policymaking as an opportunity to expand influence, especially as U.S.-Europe fissures grow and America refocuses resources elsewhere (31:22, H).
  • U.S. efforts to reduce reliance on Chinese critical minerals ongoing, even if not overtly addressed in the latest talks.

The Gold and Bitcoin Volatility Story

(35:00–42:43)

• Precious Metals Plunge:

  • Gold fell below $5,000/oz after a huge rally; silver tumbled into a bear market (35:00, B/D).
  • Axel Merk (Merk Investments) notes that both performance appreciation and new inflows are driving record AUM in gold funds.

• Michael Burry’s Crypto Caution:

  • Warns Bitcoin could enter a "death spiral," spilling over to gold/silver via forced liquidations (37:26, D).
  • Merk half-agrees, noting that when everything is levered, broad deleveraging causes cross-asset selloffs, but gold’s risk profile is fundamentally different from Bitcoin (38:10–39:16, F).

• Gold vs. Bitcoin:

  • "Bitcoin is still trying to figure out what it wants to be when it grows up." (41:04, F)
  • Bitcoin correlates with risk assets; gold is more defensive, attracting different investor bases.

• Outlook:

  • Despite recent price swings, Merk is comfortable holding gold in a volatile, debt-laden, geopolitically tense environment (42:13, F).

Notable Quotes & Memorable Moments

• "After the Meta print, it became obvious that these companies are going to step up in terms of their capex spend." (03:09, E)
• "Search margins are probably the envy of the world in terms of...how much money they print from search ads." (04:49, E)
• "This isn't a winner-take-all. They're all going to benefit. You play the memory...you play the chips..." (22:13, G)
• "Bitcoin is still trying to figure out what it wants to be when it grows up." (41:04, F)
• "We're seeing something really unprecedented in terms of sell off." (24:49, G) — on software sector volatility

Key Timestamps for Essential Segments

| Timestamp | Topic | |-----------|-----------------------------------------------------------------------------------| | 01:49–07:00 | Alphabet’s CapEx, Q4 earnings, AI metrics, Gemini users | | 07:00–09:31 | Market reaction, hyperscaler arms race, cloud monetization | | 10:47–16:25 | Alphabet’s chip strategy, vertical integration, Apple partnership implications | | 17:01–17:39 | CapEx efficiency, future questions on sustainable AI infrastructure | | 18:10–24:20 | Qualcomm’s struggles, Nvidia leadership, impacts for software sector | | 27:12–32:38 | Trump-Xi call, China’s geopolitical posture, critical minerals | | 35:00–42:43 | Gold and silver rout, crypto spillover, distinguished roles of gold vs. Bitcoin |

Conclusion

This episode offers a rapid-fire, expert dissection of Alphabet’s AI spending blitz and its impact across tech, chips, and the investment landscape. The recurring theme: the AI/cloud build-out is a multi-year generational shift, not a short-term trade. Alphabet, with its unmatched operating cash flow and chip R&D, is superbly positioned—but every technology giant is scrambling to keep pace. Meanwhile, macro uncertainty and the digitization of finance (gold/crypto) continue to spark new risks and opportunities.

This episode is essential for anyone seeking to understand the AI infrastructure race, its market impacts, and the next era of digital business competition.