8 ms·

Alphabet's cash burn raises alarm for Big Tech as AI spending climbs

275 points by 1vuio0pswjnm7 3mo ago

ferguess_k 3mo ago
There are so many news about this topics nowadays, that I think they are going to blow the horn of the final attack shortly after.
650 3mo ago
I've been seeing quite a few companies juicing short term margins and quarter to quarter maxxing even more than before, one such example: https://x.com/MaxAnderson/status/2080229375773941871 https://x.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 --- As someone who has personally spent $500k / mo+ on Google Ads for years, I can tell you with certainty: This revenue growth in Search is artificial & extremely unhealthy for Google’s business long term Search volumes are declining as legacy search is being increasingly cannibalized by non-monetized LLM queries Google’s response? Manufacture revenue growth via short-sighted, highly extractive, customer-hostile tactics. I.e. charge advertisers more for lower quality clicks, including clicks they do not want and explicitly did not approve Google to charge them for A few examples to illustrate: For all of its history until recently, Google operated on a 2nd price auction model I.e. if you bid $5 CPC and the next highest bidder bids $1 CPC, Google charged you $1.01 for the click (one penny more than the 2nd highest bidder) rather than the $5 you bid This was a genius move by Google early on as it incentivizes advertisers to input their true maximum willingness to pay rather than trying to play the game of bidding low and constantly adjusting to try to stay just ahead of the next highest bidder while still not paying too much However recently, Google silently deprecated the 2nd price auction and began charging advertisers as much as their bid and budget caps allow, regardless of what anyone else is bidding It’s a short-sighted cash grab at the expense of the long term health of the advertiser ecosystem Making thing worse, Google also recently nerfed keyword targeting precision Google previously had precise keyword targeting settings that allowed advertisers pick individual search phrases to bid on, defined down to the character w/ exact match or phrase match targeting This was one of the core features that made search advertising magic, enabling advertisers to run extremely precise campaigns based on exactly what their target customer typed But now, even if you bid on a specific term or phrase using the strictest exact -match targeting settings, Google will show your ad across 1000’s of unrelated keywords, labeling them as as “exact match (close variant)” The definition of “close variant” means whatever they want it to and changes constantly. The result is advertisers get billed for clicks that are totally irrelevant to their business and that their targeting settings explicitly forbid Google from targeting. Google does it anyway and there’s no ability to turn this off So now exact match is broad match, and broad match is just meaningless spam This is all very bad for advertisers, but for Google, it allows them to show your ad and bill you for clicks across 1000x more searches that were previously going unmonetized (mainly because they’re garbage queries no one wants) This is how you grow revenue atop declining search volumes Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day And the extra spend is entirely on the garbage keywords Google arbitrarily throws in as “exact match (close variants)” which have no value to our business, but can’t be turned off Google offers no refunds nor any recourse for overspend or spend on keywords you explicitly did not target These are not the actions of a healthy business. These are the actions of company whose core business is in decline but desperately needs to pump quarterly earnings so Wall Street will continue to fund insane capex while hopefully looking through their rapidly deteriorating negative free cash flow Google operated a benevolent monopoly for the better part of 25 yrs Meaning the value Google captured from Search was but a small fraction of the value it created, and that spread produced a potential energy that justified expectations of high earnings growth far, far into the future This is now no longer the case At the alter of AI capex, Google is sacrificing the golden goose
- lightbendover 3mo ago
  [dead]
- ambicapter 3mo ago
  > “exact match (close variant)” I have to laugh to keep from crying.
- strongpigeon 3mo ago
  > Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day When I worked on Google Ads (I left in 2020), I remember this one tripping a lot of people. As I remember it, the limit for a single day is indeed 2x daily budget, but over a month it will average to it. This is supposed to give more flexibility to the auto bidder.
- padjo 3mo ago
  Curious how you are responding to this? Are there viable alternatives you are moving budget to or are you just hostage to their new tactics?
- khurs 3mo ago
  Thanks for this informative post. Many have been puzzled as to why Google keeps claiming search isn't affected by chat apps, when clearly it is.
paxys 3mo ago
These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.
- hahahaa 3mo ago
  Too big to fail now, so everything is fine.
  - rkozik1989 3mo ago
    They've literally rated the debt as too big to fail in order to get foreign sovereign wealth funds (mostly gulf states) to agree to put up the money for loans. This has been happening this entire time.
    - hahahaa 3mo ago
      Wow. So plain. No "AAA" euphemisms this time round eh!
- toomuchtodo 3mo ago
  The top will be when Jim Cramer loudly proclaims there is no problem at Oracle and gives a buy rating. https://www.youtube.com/watch?v=gUkbdjetlY8 https://www.youtube.com/watch?v=gUkbdjetlY8
- mynameisjonny_ 3mo ago
  > 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?
  - ForHackernews 3mo ago
    No, because the LLMs will keep getting more efficient and capable. Distillation and quantization will mean firms spending trillions on giant data centres are left holding the bag. I suspect Apple ends up laughing all the way to the bank. https://github.com/microsoft/BitNet https://github.com/microsoft/BitNet
kibwen 3mo ago
Keeping in mind that Alphabet is the only one of the Mag 7 stocks that has managed to outperform the S&P 500 in 2026.
- spwa4 3mo ago
  No they haven't. SPY YTD: 9.40%, GOOG YTD: 3.33% They have (massively) outperformed it in 2025 though.
  - deleted 3mo ago
    [deleted]
  - bdcravens 3mo ago
    I'm seeing 8.43% for GOOG.
  - kibwen 3mo ago
    Not sure where you got 3.33%, looks to me like GOOGL is +9.44% YTD while GOOG is +9.1%.
    - malfist 3mo ago
      Might be related to the massive drop this morning. According to yahoo finance, YTD GOOG is +1.81% and GOOGL +2.33%
      - kibwen 3mo ago
        Amusing how volatile these stocks are. In any case, my intent was not to boost Alphabet but to denounce the overheated state of the tech sector in general, so having the entirety of the Mag 7 fall below the baseline is no skin off my nose.
- lotsofpulp 3mo ago
  Keeping in mind that Jan 1 2026 to Jul 22 2026 is an arbitrary and meaningless time period to analyze.
FartyMcFarter 3mo ago
Why does it raise alarm? Pretty sure all this spending was planned.
- gonzalohm 3mo ago
  I'm pretty sure they didn't plan to just spend cash without any return. It raises an alarm because there is no end in sight for the money burning
  - deleted 3mo ago
    [deleted]
  - dktp 3mo ago
    There is pretty clear return as of now. And half a trillion in backlog Also the ~4% drop is really not a big swing for earnings. This looks like a non story
  - saberience 3mo ago
    Since when is investing in infrastructure burning money? If there is a huge demand for shipping goods internationally, investing in ships and planes isn't burning money. There is massive demand for compute in the world right now, Google is investing in that area. That's a good thing.
    - manarth 3mo ago
      > "If there is a huge demand for shipping goods internationally, > investing in ships and planes isn't burning money. > There is massive demand for compute in the world right now" Emphasis on right now. CapEx makes sense if the demand is forecast to deliver enough profit over the expected lifespan of the investment to recoup the cost and margin. There's enough hype and exuberance in the AI market that it's likely some players are going to be left holding the bag with a write-down on assets.
  - FartyMcFarter 3mo ago
    > they didn't plan to just spend cash without any return. No return? Annual earnings have kept increasing at 20-40% for the last 4 years. Plus there's this: https://www.theregister.com/paas-and-iaas/2026/07/22/google-cloud-is-killing-it/5276632 https://www.theregister.com/paas-and-iaas/2026/07/22/google-... > Google Cloud is killing it > It's Alphabet's fastest-growing business and now makes up more than a fifth of the juggernaut's revenue and operating profit
ghoshbishakh 3mo ago
Only google serves its own model - increasing its cloud revenue. The growth chart shows linear increase over time, indicating exponential growth if cloud revenue for google.
- dominotw 3mo ago
  meta does too?
  - Zigurd 3mo ago
    Meta at least has a theory that it will transform their ad business. No guarantees but it seems like a pretty decent theory, with direct connections to revenue.
- tristanj 3mo ago
  Meta, Microsoft, Amazon also serve their own models, though these models are not frontier models.
ofjcihen 3mo ago
Is this why Google decided to release their article explaining how AI spend makes sense to the plebes?
- rnd0 3mo ago
  I missed that, link please?
  - LakshmiKiranG 3mo ago
    sure, here you go https://news.ycombinator.com/item?id=49021006 https://news.ycombinator.com/item?id=49021006
ChrisArchitect 3mo ago
Some more discussion on source: https://news.ycombinator.com/item?id=49012630 https://news.ycombinator.com/item?id=49012630
seydor 3mo ago
Haven't they announced the spending like, years ago? Is the market deaf and blind now too?
- skybrian 3mo ago
  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.
epistasis 3mo ago
I'm thinking Apple has been really smart in their AI strategy here. It seems a mistake to make unprecedentedly large capital expenditures, in a very very crowded space, without much evidence of a moat. Presumably people thought the moat would be singularity-like self-improvement of AI, but the singularity is merely a religious concept, and nobody should take religious myth as fact, it's merely narrative for orientation and inspiration.
- fullshark 3mo ago
  Their strategy to let Siri stagnate for 15 years and let everyone else take that market? Their strategy to put a bunch of not ready for consumer use AI features on their devices and then roll them back? They just have such a strong hardware + os ecosystem that they can sit on the sidelines. They'll be able to negotiate with some LLM provider at a good discount when the time is right and put harnesses around it for actual useful features.
  - HolyLampshade 3mo ago
    I think that's precisely what the previous commenter is saying. Sit on the side lines, and let other people bloody themselves up. Similar in a way to dot com. It's not to say ML won't have practical application in the future, but the likelihood that it will have specifically this form is low and worth waiting until the dust settles and a more commonly accepted utility presents itself. If AI/ML were monstrously useful in its current form the companies pushing it would not need to be hawking products; people would be bashing their doors down. I think that's why in areas where it's more directly applied to a known problem set (like Pharma research, and I'm hoping someone with Pharma expertise can pipe up here) there has been more natural pickup. Coming from trading and markets, ML has been a part of the mix in quantitative strategies for...well, nearly 20 years (by definition I suppose). Spaces with obvious utility will see rapid adoption. Worth waiting that out, honestly.
  - dundarious 3mo ago
    The point was that one rational approach is that it's OK to not be top ranked in a market that has significant medium-term profitability issues. Apple has no problem creating new markets, but not if being top ranked requires years and years and years without return on investment after launch, and large subsidies. Not to say Apple hasn't failed at creating new markets either, or anything like that.
dev0p 3mo ago
Basically all of Big Tech is betting it all on Red that this whole AI business pays off before they end up losing everything. And I get it, it would be unwise to stay behind and ignore what could very easily turn out to be humanity's greatest invention since pizza. But still, is there seriously no other way to go about it instead of collectively running head first, hands behind at a breakneck pace, while risking the complete collapse of ... well, everything? I suppose not, especially considering it's a technology with potentially massive military and social impact on a global scale, or even beyond that if we're being particularly delusional. Though one has to wonder who will end up paying the tab, and I think that we all know the answer to that.
Zigurd 3mo ago
Looking at cash burn is looking at the wrong end of the horse. Some companies, like Meta, have burned huge piles of cash in pursuit of, for example, the Metaverse and they've got nothing to show for it, not even a slight increment in ad tech, and yet they earned enough to shrug it off. There's a big difference between Google spending tens of billions on AI infrastructure and what Oracle is doing. Oracle is spending to get on a bandwagon. Google is transforming their business, so far seemingly correctly. If AI flops big-time, Google will be left with some stranded assets, but it won't be existential the way it would be to Oracle.
- snowchaser 3mo ago
  If AI flops, they’re be left holding large pools of useful datacenter/compute capacity and “revert” to one of the most profitable businesses of all time.
  - khurs 3mo ago
    Meta entering cloud at scale would see huge competition and lowering of profit margins.
  - TitaRusell 3mo ago
    Welcome to the world of too big to fail and the rich are beyond mortal judgement.
  - bdangubic 3mo ago
    useful for what? my unemployed neighbours wordpress website?
- khurs 3mo ago
  >and yet they earned enough to shrug it off. Zuck has 60% voting power, otherwise he would have been fired over metaverse and then model delays
- phyrex 3mo ago
  Meta glasses are a direct result of this investment, and they're selling like hotcakes
Centigonal 3mo ago
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.
- khurs 3mo ago
  That $85 billion was bonds, and requires ongoing repayments of billions every year in interest payments And then the $85bn to be repaid too.
  - Centigonal 3mo ago
    I'm referring to the equity offering that started in June and has a second component that starts in 2026Q3. Most of this raise came from the sale of Class A and Class C stock. A fraction came from the sale of convertible stock. To my knowledge, none of this raise came from the sale of bonds. Also, looks like I got it wrong and they've only raised $45B to date. The rest will come as part of the ATM offering program that begins in Q3. more details here: https://www.sec.gov/Archives/edgar/data/1652044/000119312526251733/d160205dfwp.htm https://www.sec.gov/Archives/edgar/data/1652044/000119312526...
    - khurs 3mo ago
      sorry, my error. Bonds was $31.5 billion https://www.reuters.com/business/alphabet-sells-bonds-worth-20-billion-fund-ai-spending-2026-02-10/ https://www.reuters.com/business/alphabet-sells-bonds-worth-...
      - Centigonal 3mo ago
        wow, they really are exhausting every avenue to raise as much money as possible.
flerchin 3mo ago
Profit is up 20% YoY. Google is a money printing machine, and they printed over $40B last quarter. Are you kidding me.
- MikeNotThePope 3mo ago
  [dead]
gavin_gee 3mo ago
i dont understand the concern. they are putting up great financials. you have to invest ahead of the outcome. this is just classic quarterly public company earnings BS, where public markets dont reward innovation investment. they just want crank the handle financials. The bigger issue is on the model front, can Google compete; Gemini doesnt seem to be able to compete on the heavy expert end; they are doing well on lighter faster models.
- giantg2 3mo ago
  Their bigger positive in my opinion is that they have massive amounts of data and are working to vertically integrate with stuff like TPUs.
- 01100011 3mo ago
  I've given up on Gemini. It sounds smart but most of what it tells me ends up being wrong or misleading. I might actually hand $20/mo to OpenAI. It's been far more helpful with the random collection of legal and health problems I've thrown at it. My recent comment history is going to make me come across like a shill for them but, holy crap, GPT has been doing amazing things for me at work as well. I don't get it either... Google has so much talent yet they just can't seem to get it right.
  - chrisjj 3mo ago
    > It's been far more helpful with the random collection of legal and health problems I've thrown at it. As in convincing? Or accurate?
    - 01100011 3mo ago
      Some of both sadly, but where I've checked, accuracy.
  - heaney-555 3mo ago
    Are you using Gemini Flash or Gemini Pro? Are you about to compare the free tier of Gemini to the paid tier of OpenAI?
infecto 3mo ago
It could absolutely harm their long term value but keep in mind Alphabet and the other hyperscalers are generally flush with cash. Is this a lot of debt? Absolutely but the businesses are generating a lot of cash too.
- khurs 3mo ago
  Are you clicking on more ads now or less. Are you using google search more now or less. I'm using it a lot less. Don't think Google can point to past revenue an indicator of future revenue, they need to establish new streams of revenue.
  - infecto 3mo ago
    Have you checked the numbers? I thought for most of the ad driven companies the numbers are up.
bethekidyouwant 3mo ago
Oh no a company spending money is bad for the economy… especially since they are spending it on … the most advanced tech humanity has ever created…
- neonstatic 3mo ago
  Photonic computing?
tedggh 3mo ago
The current commitment by hyperscalers is around 1.7T USD, reported liabilities 1.3T and this year global debt related to AI is 570B. So that’s around 3T total. For this to make sense AI must generate 2T in new revenue per year by the end of the decade. And that would be only a 10% ROIC. For context ROIC for big tech is around 35% so at 10% they will be barely breaking even. The SP500 gives 10-12%. With 10% ROIC from AI the only thing investors will be celebrating is that the whole thing didn’t trigger a financial crisis. Data centers are NOT real estate. Buildings and power lines usually last 30-50 years. GPUs become obsolete in 5 years. If hyperscalers need to refinance and their interest rate goes up there’s zero margin for error.
- CodingJeebus 3mo ago
  > GPUs become obsolete in 5 years. Not only that, but they're typically amortized over 5 years, where the actual lifespan usually falls far shorter (1-3 years), adding to the artificial subsidy conditions we see today. So they're gaming the lenders into deferring interest payments as much as possible today so that new competitors don't have the same cheap financing advantage.[0] 0: https://blog.citp.princeton.edu/2025/10/15/lifespan-of-ai-chips-the-300-billion-question/ https://blog.citp.princeton.edu/2025/10/15/lifespan-of-ai-ch...
  - roryirvine 3mo ago
    If they're deliberately inflating the likely useful economic life of their assets to get a lower interest rate, it's hard to see how that wouldn't be classed as fraud. It's the sort of behaviour that really does end up with people going to prison.
    - hluska 3mo ago
      You’re all getting some concepts mixed up here. That five year amortization rate is the IRS’ usual amortization rate for computers. GPUs are classed as computers for asset depreciation purposes. But GPUs are part of 168(k) so they’re eligible for a 100% bonus depreciation the year of purchase. There’s nothing fraudulent at all here just people using terms they really aren’t comfortable with.
everyone 3mo ago
GOTTA BUY THOSE TULIPS!!
khurs 3mo ago
How does this spend affect Google CEO's $692 Million potential pay? Is it meeting the required goals or taking him away from them? https://fortune.com/2026/03/10/google-ceo-sundar-pichai-692-million-compensation-waymo-wing-success/ https://fortune.com/2026/03/10/google-ceo-sundar-pichai-692-...
dmix 3mo ago
So tired of media doomposting and exaggerating everything.
- Nifty3929 3mo ago
  It's not all roses out there, to be sure. But there are some roses, I think. A lot of roses actually. Can we talk about the roses once in a while?
narrator 3mo ago
All these big tech companies are fighting over the basics eventually like power and transformers and don't like to do anything dirty that would hurt their ESG score like getting into any sort of industrial business. Thus, the default is all that stuff that heavily bottlenecks American AI gets done in China. If you listen to Tesla's recent conference call they are going to making solar panels all the way back to making the silicon ingots and totally vertically integrate. Elon lamented on a previous call that nobody wants to get involved in these primary industries and he has to do it all himself unless he puts his whole supply chain in China. For example, Tesla recently opened a state of the art lithium refinery in Texas cause nobody outside of China does that anymore. He's opening a new fab, because everyone else is too hesitant to expand to meet the capacity he needs.
LakshmiKiranG 3mo ago
[flagged]
jmyeet 3mo ago
There was an excellent article about AI DC value and depreciation yesterday [1] (discussion [2]). The effective life of GPUs in paticular is a huge unknown. One of my big questions has always been "what will happen to existing GPUs when new GPUs come out?" My guess is that the life of these things isn't as long as the depreciation schedules for some of these companies would have you believe. IIRC Meta was using an 8 year schedule whereas Google is using 4-6, which seems more realistic. I believe that performance-per-Watt is going to be the only metric that matters. We already have 6 year old hardware (A100) that cannot run the latest models. There will also be new capabilities (eg quantization methods). I'm not concerned with Alphabet's cash burn rate to be honest. These tech companies are typically shielding themselves from the consequences of this by using Special Purpose Vehicles ("SPVs") where the GPUs themselves are the secured assets for the loans. Even the physical buildings and infrastructure isn't owned by the SPV. Those are rented from another vehicle. So investors are pouring money in to buy GPUs for Google, Amazon, etc. Even SpaceX is partly-insulated by using an xAI SPV. All of this is I think is a huge risk for OpenAI and Anthropic. The risk to SpaceX is a stock collapse because the AI aspect was always overstated (IMHO). I think Google will be fine. What is funny is that this is almost using Private Equity type tactics against other investors. Things like the structcures in which the real estate and physical buildings are held in separate entities and the SPVs end up off balance sheet. [1]: https://ciphertalk.substack.com/p/nobody-knows-what-a-used-gpu-cluster https://ciphertalk.substack.com/p/nobody-knows-what-a-used-g... [2]: https://news.ycombinator.com/item?id=48917135 https://news.ycombinator.com/item?id=48917135
mxzesley 3mo ago
[dead]
tonyhart7 3mo ago
please let me buy some ram and storage
Diogenesian 3mo ago
Non-paywalled MSN link: https://www.msn.com/en-us/money/general/alphabet-s-cash-burn-raises-alarm-for-big-tech-as-ai-spending-climbs/ar-AA28xq0Y?ocid=BingNewsSerp https://www.msn.com/en-us/money/general/alphabet-s-cash-burn... (still somewhat outraged Reuters has a paywall now. Also BBC, CNN...)
tysilva 3mo ago
Google does have a positional advantage in Android and Apple picking up Gemini as the baked-in AI assistant. It will be interesting to see what kind of impact that has in their services and profitability for AI.
jnyst1985 3mo ago
Sounds like Google is the only honest company in the market. Cash burn alone doesn’t mean much, it’s free cash flow vs return on invested capital that’s the real signal imo.
haihaoxu 3mo ago
wow

275 points by 1vuio0pswjnm7 3mo ago

There are so many news about this topics nowadays, that I think they are going to blow the horn of the final attack shortly after.

650 3mo ago

I've been seeing quite a few companies juicing short term margins and quarter to quarter maxxing even more than before, one such example: https://x.com/MaxAnderson/status/2080229375773941871 https://x.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 https://xcancel.com/MaxAnderson/status/2080229375773941871 --- As someone who has personally spent $500k / mo+ on Google Ads for years, I can tell you with certainty: This revenue growth in Search is artificial & extremely unhealthy for Google’s business long term Search volumes are declining as legacy search is being increasingly cannibalized by non-monetized LLM queries Google’s response? Manufacture revenue growth via short-sighted, highly extractive, customer-hostile tactics. I.e. charge advertisers more for lower quality clicks, including clicks they do not want and explicitly did not approve Google to charge them for A few examples to illustrate: For all of its history until recently, Google operated on a 2nd price auction model I.e. if you bid $5 CPC and the next highest bidder bids $1 CPC, Google charged you $1.01 for the click (one penny more than the 2nd highest bidder) rather than the $5 you bid This was a genius move by Google early on as it incentivizes advertisers to input their true maximum willingness to pay rather than trying to play the game of bidding low and constantly adjusting to try to stay just ahead of the next highest bidder while still not paying too much However recently, Google silently deprecated the 2nd price auction and began charging advertisers as much as their bid and budget caps allow, regardless of what anyone else is bidding It’s a short-sighted cash grab at the expense of the long term health of the advertiser ecosystem Making thing worse, Google also recently nerfed keyword targeting precision Google previously had precise keyword targeting settings that allowed advertisers pick individual search phrases to bid on, defined down to the character w/ exact match or phrase match targeting This was one of the core features that made search advertising magic, enabling advertisers to run extremely precise campaigns based on exactly what their target customer typed But now, even if you bid on a specific term or phrase using the strictest exact -match targeting settings, Google will show your ad across 1000’s of unrelated keywords, labeling them as as “exact match (close variant)” The definition of “close variant” means whatever they want it to and changes constantly. The result is advertisers get billed for clicks that are totally irrelevant to their business and that their targeting settings explicitly forbid Google from targeting. Google does it anyway and there’s no ability to turn this off So now exact match is broad match, and broad match is just meaningless spam This is all very bad for advertisers, but for Google, it allows them to show your ad and bill you for clicks across 1000x more searches that were previously going unmonetized (mainly because they’re garbage queries no one wants) This is how you grow revenue atop declining search volumes Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day And the extra spend is entirely on the garbage keywords Google arbitrarily throws in as “exact match (close variants)” which have no value to our business, but can’t be turned off Google offers no refunds nor any recourse for overspend or spend on keywords you explicitly did not target These are not the actions of a healthy business. These are the actions of company whose core business is in decline but desperately needs to pump quarterly earnings so Wall Street will continue to fund insane capex while hopefully looking through their rapidly deteriorating negative free cash flow Google operated a benevolent monopoly for the better part of 25 yrs Meaning the value Google captured from Search was but a small fraction of the value it created, and that spread produced a potential energy that justified expectations of high earnings growth far, far into the future This is now no longer the case At the alter of AI capex, Google is sacrificing the golden goose

lightbendover 3mo ago
[dead]
ambicapter 3mo ago
> “exact match (close variant)” I have to laugh to keep from crying.
strongpigeon 3mo ago
> Lastly, and perhaps most egregiously, Google quietly stopped respecting budget caps by a factor of 2x. For example campaigns we’ve been running for years with $1000 daily budget caps suddenly began spending $2000+ per day When I worked on Google Ads (I left in 2020), I remember this one tripping a lot of people. As I remember it, the limit for a single day is indeed 2x daily budget, but over a month it will average to it. This is supposed to give more flexibility to the auto bidder.
padjo 3mo ago
Curious how you are responding to this? Are there viable alternatives you are moving budget to or are you just hostage to their new tactics?
khurs 3mo ago
Thanks for this informative post. Many have been puzzled as to why Google keeps claiming search isn't affected by chat apps, when clearly it is.

paxys 3mo ago

These alarms have been going off for a long time now. Everyone is already in too deep to admit that there’s a problem.

hahahaa 3mo ago
Too big to fail now, so everything is fine.
- rkozik1989 3mo ago
  They've literally rated the debt as too big to fail in order to get foreign sovereign wealth funds (mostly gulf states) to agree to put up the money for loans. This has been happening this entire time.
  - hahahaa 3mo ago
    Wow. So plain. No "AAA" euphemisms this time round eh!
toomuchtodo 3mo ago
The top will be when Jim Cramer loudly proclaims there is no problem at Oracle and gives a buy rating. https://www.youtube.com/watch?v=gUkbdjetlY8 https://www.youtube.com/watch?v=gUkbdjetlY8
mynameisjonny_ 3mo ago
> 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?
- ForHackernews 3mo ago
  No, because the LLMs will keep getting more efficient and capable. Distillation and quantization will mean firms spending trillions on giant data centres are left holding the bag. I suspect Apple ends up laughing all the way to the bank. https://github.com/microsoft/BitNet https://github.com/microsoft/BitNet

kibwen 3mo ago

Keeping in mind that Alphabet is the only one of the Mag 7 stocks that has managed to outperform the S&P 500 in 2026.

spwa4 3mo ago
No they haven't. SPY YTD: 9.40%, GOOG YTD: 3.33% They have (massively) outperformed it in 2025 though.
- deleted 3mo ago
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- bdcravens 3mo ago
  I'm seeing 8.43% for GOOG.
- kibwen 3mo ago
  Not sure where you got 3.33%, looks to me like GOOGL is +9.44% YTD while GOOG is +9.1%.
  - malfist 3mo ago
    Might be related to the massive drop this morning. According to yahoo finance, YTD GOOG is +1.81% and GOOGL +2.33%
    - kibwen 3mo ago
      Amusing how volatile these stocks are. In any case, my intent was not to boost Alphabet but to denounce the overheated state of the tech sector in general, so having the entirety of the Mag 7 fall below the baseline is no skin off my nose.
lotsofpulp 3mo ago
Keeping in mind that Jan 1 2026 to Jul 22 2026 is an arbitrary and meaningless time period to analyze.

FartyMcFarter 3mo ago

Why does it raise alarm? Pretty sure all this spending was planned.

gonzalohm 3mo ago
I'm pretty sure they didn't plan to just spend cash without any return. It raises an alarm because there is no end in sight for the money burning
- deleted 3mo ago
  [deleted]
- dktp 3mo ago
  There is pretty clear return as of now. And half a trillion in backlog Also the ~4% drop is really not a big swing for earnings. This looks like a non story
- saberience 3mo ago
  Since when is investing in infrastructure burning money? If there is a huge demand for shipping goods internationally, investing in ships and planes isn't burning money. There is massive demand for compute in the world right now, Google is investing in that area. That's a good thing.
  - manarth 3mo ago
    > "If there is a huge demand for shipping goods internationally, > investing in ships and planes isn't burning money. > There is massive demand for compute in the world right now" Emphasis on right now. CapEx makes sense if the demand is forecast to deliver enough profit over the expected lifespan of the investment to recoup the cost and margin. There's enough hype and exuberance in the AI market that it's likely some players are going to be left holding the bag with a write-down on assets.
- FartyMcFarter 3mo ago
  > they didn't plan to just spend cash without any return. No return? Annual earnings have kept increasing at 20-40% for the last 4 years. Plus there's this: https://www.theregister.com/paas-and-iaas/2026/07/22/google-cloud-is-killing-it/5276632 https://www.theregister.com/paas-and-iaas/2026/07/22/google-... > Google Cloud is killing it > It's Alphabet's fastest-growing business and now makes up more than a fifth of the juggernaut's revenue and operating profit

ghoshbishakh 3mo ago

Only google serves its own model - increasing its cloud revenue. The growth chart shows linear increase over time, indicating exponential growth if cloud revenue for google.

dominotw 3mo ago
meta does too?
- Zigurd 3mo ago
  Meta at least has a theory that it will transform their ad business. No guarantees but it seems like a pretty decent theory, with direct connections to revenue.
tristanj 3mo ago
Meta, Microsoft, Amazon also serve their own models, though these models are not frontier models.

ofjcihen 3mo ago

Is this why Google decided to release their article explaining how AI spend makes sense to the plebes?

rnd0 3mo ago
I missed that, link please?
- LakshmiKiranG 3mo ago
  sure, here you go https://news.ycombinator.com/item?id=49021006 https://news.ycombinator.com/item?id=49021006

ChrisArchitect 3mo ago

Some more discussion on source: https://news.ycombinator.com/item?id=49012630 https://news.ycombinator.com/item?id=49012630

seydor 3mo ago

Haven't they announced the spending like, years ago? Is the market deaf and blind now too?

skybrian 3mo ago
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.

epistasis 3mo ago

I'm thinking Apple has been really smart in their AI strategy here. It seems a mistake to make unprecedentedly large capital expenditures, in a very very crowded space, without much evidence of a moat. Presumably people thought the moat would be singularity-like self-improvement of AI, but the singularity is merely a religious concept, and nobody should take religious myth as fact, it's merely narrative for orientation and inspiration.

fullshark 3mo ago
Their strategy to let Siri stagnate for 15 years and let everyone else take that market? Their strategy to put a bunch of not ready for consumer use AI features on their devices and then roll them back? They just have such a strong hardware + os ecosystem that they can sit on the sidelines. They'll be able to negotiate with some LLM provider at a good discount when the time is right and put harnesses around it for actual useful features.
- HolyLampshade 3mo ago
  I think that's precisely what the previous commenter is saying. Sit on the side lines, and let other people bloody themselves up. Similar in a way to dot com. It's not to say ML won't have practical application in the future, but the likelihood that it will have specifically this form is low and worth waiting until the dust settles and a more commonly accepted utility presents itself. If AI/ML were monstrously useful in its current form the companies pushing it would not need to be hawking products; people would be bashing their doors down. I think that's why in areas where it's more directly applied to a known problem set (like Pharma research, and I'm hoping someone with Pharma expertise can pipe up here) there has been more natural pickup. Coming from trading and markets, ML has been a part of the mix in quantitative strategies for...well, nearly 20 years (by definition I suppose). Spaces with obvious utility will see rapid adoption. Worth waiting that out, honestly.
- dundarious 3mo ago
  The point was that one rational approach is that it's OK to not be top ranked in a market that has significant medium-term profitability issues. Apple has no problem creating new markets, but not if being top ranked requires years and years and years without return on investment after launch, and large subsidies. Not to say Apple hasn't failed at creating new markets either, or anything like that.

dev0p 3mo ago

Basically all of Big Tech is betting it all on Red that this whole AI business pays off before they end up losing everything. And I get it, it would be unwise to stay behind and ignore what could very easily turn out to be humanity's greatest invention since pizza. But still, is there seriously no other way to go about it instead of collectively running head first, hands behind at a breakneck pace, while risking the complete collapse of ... well, everything? I suppose not, especially considering it's a technology with potentially massive military and social impact on a global scale, or even beyond that if we're being particularly delusional. Though one has to wonder who will end up paying the tab, and I think that we all know the answer to that.

Zigurd 3mo ago

Looking at cash burn is looking at the wrong end of the horse. Some companies, like Meta, have burned huge piles of cash in pursuit of, for example, the Metaverse and they've got nothing to show for it, not even a slight increment in ad tech, and yet they earned enough to shrug it off. There's a big difference between Google spending tens of billions on AI infrastructure and what Oracle is doing. Oracle is spending to get on a bandwagon. Google is transforming their business, so far seemingly correctly. If AI flops big-time, Google will be left with some stranded assets, but it won't be existential the way it would be to Oracle.

snowchaser 3mo ago
If AI flops, they’re be left holding large pools of useful datacenter/compute capacity and “revert” to one of the most profitable businesses of all time.
- khurs 3mo ago
  Meta entering cloud at scale would see huge competition and lowering of profit margins.
- TitaRusell 3mo ago
  Welcome to the world of too big to fail and the rich are beyond mortal judgement.
- bdangubic 3mo ago
  useful for what? my unemployed neighbours wordpress website?
khurs 3mo ago
>and yet they earned enough to shrug it off. Zuck has 60% voting power, otherwise he would have been fired over metaverse and then model delays
phyrex 3mo ago
Meta glasses are a direct result of this investment, and they're selling like hotcakes

Centigonal 3mo ago

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.

khurs 3mo ago
That $85 billion was bonds, and requires ongoing repayments of billions every year in interest payments And then the $85bn to be repaid too.
- Centigonal 3mo ago
  I'm referring to the equity offering that started in June and has a second component that starts in 2026Q3. Most of this raise came from the sale of Class A and Class C stock. A fraction came from the sale of convertible stock. To my knowledge, none of this raise came from the sale of bonds. Also, looks like I got it wrong and they've only raised $45B to date. The rest will come as part of the ATM offering program that begins in Q3. more details here: https://www.sec.gov/Archives/edgar/data/1652044/000119312526251733/d160205dfwp.htm https://www.sec.gov/Archives/edgar/data/1652044/000119312526...
  - khurs 3mo ago
    sorry, my error. Bonds was $31.5 billion https://www.reuters.com/business/alphabet-sells-bonds-worth-20-billion-fund-ai-spending-2026-02-10/ https://www.reuters.com/business/alphabet-sells-bonds-worth-...
    - Centigonal 3mo ago
      wow, they really are exhausting every avenue to raise as much money as possible.

flerchin 3mo ago

Profit is up 20% YoY. Google is a money printing machine, and they printed over $40B last quarter. Are you kidding me.

MikeNotThePope 3mo ago
[dead]

gavin_gee 3mo ago

i dont understand the concern. they are putting up great financials. you have to invest ahead of the outcome. this is just classic quarterly public company earnings BS, where public markets dont reward innovation investment. they just want crank the handle financials. The bigger issue is on the model front, can Google compete; Gemini doesnt seem to be able to compete on the heavy expert end; they are doing well on lighter faster models.

giantg2 3mo ago
Their bigger positive in my opinion is that they have massive amounts of data and are working to vertically integrate with stuff like TPUs.
01100011 3mo ago
I've given up on Gemini. It sounds smart but most of what it tells me ends up being wrong or misleading. I might actually hand $20/mo to OpenAI. It's been far more helpful with the random collection of legal and health problems I've thrown at it. My recent comment history is going to make me come across like a shill for them but, holy crap, GPT has been doing amazing things for me at work as well. I don't get it either... Google has so much talent yet they just can't seem to get it right.
- chrisjj 3mo ago
  > It's been far more helpful with the random collection of legal and health problems I've thrown at it. As in convincing? Or accurate?
  - 01100011 3mo ago
    Some of both sadly, but where I've checked, accuracy.
- heaney-555 3mo ago
  Are you using Gemini Flash or Gemini Pro? Are you about to compare the free tier of Gemini to the paid tier of OpenAI?

infecto 3mo ago

It could absolutely harm their long term value but keep in mind Alphabet and the other hyperscalers are generally flush with cash. Is this a lot of debt? Absolutely but the businesses are generating a lot of cash too.

khurs 3mo ago
Are you clicking on more ads now or less. Are you using google search more now or less. I'm using it a lot less. Don't think Google can point to past revenue an indicator of future revenue, they need to establish new streams of revenue.
- infecto 3mo ago
  Have you checked the numbers? I thought for most of the ad driven companies the numbers are up.

bethekidyouwant 3mo ago

Oh no a company spending money is bad for the economy… especially since they are spending it on … the most advanced tech humanity has ever created…

neonstatic 3mo ago
Photonic computing?

tedggh 3mo ago

The current commitment by hyperscalers is around 1.7T USD, reported liabilities 1.3T and this year global debt related to AI is 570B. So that’s around 3T total. For this to make sense AI must generate 2T in new revenue per year by the end of the decade. And that would be only a 10% ROIC. For context ROIC for big tech is around 35% so at 10% they will be barely breaking even. The SP500 gives 10-12%. With 10% ROIC from AI the only thing investors will be celebrating is that the whole thing didn’t trigger a financial crisis. Data centers are NOT real estate. Buildings and power lines usually last 30-50 years. GPUs become obsolete in 5 years. If hyperscalers need to refinance and their interest rate goes up there’s zero margin for error.

CodingJeebus 3mo ago
> GPUs become obsolete in 5 years. Not only that, but they're typically amortized over 5 years, where the actual lifespan usually falls far shorter (1-3 years), adding to the artificial subsidy conditions we see today. So they're gaming the lenders into deferring interest payments as much as possible today so that new competitors don't have the same cheap financing advantage.[0] 0: https://blog.citp.princeton.edu/2025/10/15/lifespan-of-ai-chips-the-300-billion-question/ https://blog.citp.princeton.edu/2025/10/15/lifespan-of-ai-ch...
- roryirvine 3mo ago
  If they're deliberately inflating the likely useful economic life of their assets to get a lower interest rate, it's hard to see how that wouldn't be classed as fraud. It's the sort of behaviour that really does end up with people going to prison.
  - hluska 3mo ago
    You’re all getting some concepts mixed up here. That five year amortization rate is the IRS’ usual amortization rate for computers. GPUs are classed as computers for asset depreciation purposes. But GPUs are part of 168(k) so they’re eligible for a 100% bonus depreciation the year of purchase. There’s nothing fraudulent at all here just people using terms they really aren’t comfortable with.

everyone 3mo ago

GOTTA BUY THOSE TULIPS!!

khurs 3mo ago

How does this spend affect Google CEO's $692 Million potential pay? Is it meeting the required goals or taking him away from them? https://fortune.com/2026/03/10/google-ceo-sundar-pichai-692-million-compensation-waymo-wing-success/ https://fortune.com/2026/03/10/google-ceo-sundar-pichai-692-...

dmix 3mo ago

So tired of media doomposting and exaggerating everything.

Nifty3929 3mo ago
It's not all roses out there, to be sure. But there are some roses, I think. A lot of roses actually. Can we talk about the roses once in a while?

narrator 3mo ago

All these big tech companies are fighting over the basics eventually like power and transformers and don't like to do anything dirty that would hurt their ESG score like getting into any sort of industrial business. Thus, the default is all that stuff that heavily bottlenecks American AI gets done in China. If you listen to Tesla's recent conference call they are going to making solar panels all the way back to making the silicon ingots and totally vertically integrate. Elon lamented on a previous call that nobody wants to get involved in these primary industries and he has to do it all himself unless he puts his whole supply chain in China. For example, Tesla recently opened a state of the art lithium refinery in Texas cause nobody outside of China does that anymore. He's opening a new fab, because everyone else is too hesitant to expand to meet the capacity he needs.

LakshmiKiranG 3mo ago

[flagged]

jmyeet 3mo ago

There was an excellent article about AI DC value and depreciation yesterday [1] (discussion [2]). The effective life of GPUs in paticular is a huge unknown. One of my big questions has always been "what will happen to existing GPUs when new GPUs come out?" My guess is that the life of these things isn't as long as the depreciation schedules for some of these companies would have you believe. IIRC Meta was using an 8 year schedule whereas Google is using 4-6, which seems more realistic. I believe that performance-per-Watt is going to be the only metric that matters. We already have 6 year old hardware (A100) that cannot run the latest models. There will also be new capabilities (eg quantization methods). I'm not concerned with Alphabet's cash burn rate to be honest. These tech companies are typically shielding themselves from the consequences of this by using Special Purpose Vehicles ("SPVs") where the GPUs themselves are the secured assets for the loans. Even the physical buildings and infrastructure isn't owned by the SPV. Those are rented from another vehicle. So investors are pouring money in to buy GPUs for Google, Amazon, etc. Even SpaceX is partly-insulated by using an xAI SPV. All of this is I think is a huge risk for OpenAI and Anthropic. The risk to SpaceX is a stock collapse because the AI aspect was always overstated (IMHO). I think Google will be fine. What is funny is that this is almost using Private Equity type tactics against other investors. Things like the structcures in which the real estate and physical buildings are held in separate entities and the SPVs end up off balance sheet. [1]: https://ciphertalk.substack.com/p/nobody-knows-what-a-used-gpu-cluster https://ciphertalk.substack.com/p/nobody-knows-what-a-used-g... [2]: https://news.ycombinator.com/item?id=48917135 https://news.ycombinator.com/item?id=48917135

mxzesley 3mo ago

[dead]

tonyhart7 3mo ago

please let me buy some ram and storage

Diogenesian 3mo ago

Non-paywalled MSN link: https://www.msn.com/en-us/money/general/alphabet-s-cash-burn-raises-alarm-for-big-tech-as-ai-spending-climbs/ar-AA28xq0Y?ocid=BingNewsSerp https://www.msn.com/en-us/money/general/alphabet-s-cash-burn... (still somewhat outraged Reuters has a paywall now. Also BBC, CNN...)

tysilva 3mo ago

Google does have a positional advantage in Android and Apple picking up Gemini as the baked-in AI assistant. It will be interesting to see what kind of impact that has in their services and profitability for AI.

jnyst1985 3mo ago

Sounds like Google is the only honest company in the market. Cash burn alone doesn’t mean much, it’s free cash flow vs return on invested capital that’s the real signal imo.

haihaoxu 3mo ago

wow