They just raised $85 billion and they're sitting on a mountain of cash - if their spending didn't increase in this context, it'd be bad management. The real story here is that they have decided to spend that mountain of cash on AI CapEx.
Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
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Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#92These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
The alarms in this case are that the profits and margins won’t be as high as we’ve come to expect from cloud companies. Other than Oracle’s questionable spending spree, these big tech companies are still in very good financial positions. The enormous R&D and infrastructure spends are just feeling unusual to investors who got comparable with the unusually high margins and low costs for SaaS companies. Now they have to…
Also all these companies went from buybacks to dilution and debts again.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#93Is this why Google decided to release their article explaining how AI spend makes sense to the plebes?
I missed that, link please?
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#94Earlier quoted context omitted.
The article notes Google Cloud revenue grew 82% YoY
Why do people choose the cloud with a history of randomly deleting billion-dollar accounts?
UniSuper?
(The claim felt so wild I wanted to check, and indeed, the private Google Cloud for the $125bn Australian pension fund was accidentally deleted by a provisioning misconfiguration. Any others?)
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#95Earlier quoted context omitted.
Are you asserting that there exists a time period to analyze that is not arbitrary and meaningless? If so, which? The reason why 2026 specifically is interesting is because it wasn't until late December of last year that AI models started to demonstrate particularly interesting capabilities, while we finally got IPO announcements for OpenAI and Anthropic. Assuming that the market works at all, it should be pricing in…
> wasn't until late December of last year that AI models started to demonstrate particularly interesting capabilities What are you referring to here?
If what they're referring to is coding agents, I can say they were pretty crappy as of November last year, and they've come a long way. Much more useful and usable now.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#96These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
The alarms in this case are that the profits and margins won’t be as high as we’ve come to expect from cloud companies. Other than Oracle’s questionable spending spree, these big tech companies are still in very good financial positions. The enormous R&D and infrastructure spends are just feeling unusual to investors who got comparable with the unusually high margins and low costs for SaaS companies. Now they have to…
If the margins aren't as high then there will be a repricing for all the massive cloud companies, which means several trillions worth of valuations to be cut from the companies.
AWS/Azure/GCP/Oracle/SpaceX/etc neoclouds... are worth a combined 10+Trillion. That going down by 50-70% is going to be insane.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#97Earlier quoted context omitted.
"Anthropic and OpenAI generate a lot of revenue with relatively few employees – an estimated $9M and $5.5M in revenue per employee (RPE), respectively. If either company were to go public, it would have a higher RPE than any public tech company on Forbes’ Global 2000 list." https://epoch.ai/data-insights/revenue-per-employee-ai-compa...
Revenue isn't profit though. Anthropic is already profitable OpenAI financials have looked doomed for the past year
I’ve never seen anything point to Anthropic being profitable.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#98Earlier quoted context omitted.
The problem is that the dramatic improvement in capabilities is not translating to a dramatic increase in revenue.
> not translating to a dramatic increase in revenue. Completely false. AI and AI related revenues are growing exponentially .
Exponential growth when you're starting from zero is neither difficult nor sufficient in this case. The title of the linked thread is "Dramatic cash burn." So clearly, the revenue did not grow anywhere fast enough.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#99Haven't they announced the spending like, years ago? Is the market deaf and blind now too?
They raised their forecast a bit:
> The search giant now expects to spend between $195 billion and $205 billion in capital expenditures, its finance chief Anat Ashkenazi said on a conference call with analysts. The company said last quarter that it planned to spend between $180 billion and $190 billion this year.
Re: Alphabet's cash burn raises alarm for Big Tech as AI spending climbs
#100These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
> Everyone is in too deep to now admit that there’s a problem I'm not sure how to square this with the dramatic improvement in LLM capabilities in the last 8-9 months. If anything, it makes the earlier investments look prescient?
It's an internet/railroad issue again.
Tech is real, impact is gigantic, long term winners hard to predict, capex spending hard to recoup soon, if ever.
And differently than internet or rails, you don't build once and maintain later, but enter a loop of ever increased spending to keep on top of the arms race and ever exploding usage.