CNBC’s MacKenzie Sigalos joins 'Money Movers' to discuss Alphabet shares popping as CapEx soars amid AI wars.

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Alphabet has raised its capital expenditure forecast to $85 billion, with plans to invest even more in the coming year. This move is part of the company's strategy to compete with other major cloud providers such as Microsoft Azure, Amazon Web Services, and Meta. Analysts note that Alphabet's increased spending is supported by strong demand, as evidenced by a $106 billion cloud backlog and a doubling of large deals year over year.

Despite a decrease in free cash flow to $5 billion, analysts view Alphabet's reinvestment as a positive step, highlighting the company's ability to scale its computing infrastructure rapidly with custom in-house chips. Cloud revenue grew by 32%, exceeding expectations and validating Alphabet's focus on AI infrastructure. The increased capital expenditure also sets a new benchmark for competitors ahead of their upcoming earnings reports.

Alphabet pops on earnings, ramps up its CapEx spend

To pour in, we're going to start with one of today's biggest earnings results, and that would be Alphabet, because it is rising after the company increased its capital spending forecast to $85 billion, one of the highlights of the quarter. Our Mackenzie Sagalos has more on Wall Street's reaction. Mackenzie, good morning. Hey, good morning. Analysts liked the print, Sarah, impressed that Alphabet is still growing search and ads, even as it pours money into AI. Now, as you mentioned, the company raised full year CapEx guidance by $10 billion, quarterly investment came in nearly 20% above estimates, and Alphabet says that it's going even higher next year. KeyBank is already floating a $100 billion estimate for 2026, and it's all part of closing the gap in the hyperscaler wars with Azure, AWS, and Meta, which says that it's building the largest compute fleet of any company. But the spend by Alphabet is backed by real demand. The cloud backlog hit $106 billion and deals over $250 million doubled year over year. Now, analysts say that Google is reinvesting from a position of strength, scaling compute faster than rivals, thanks to its custom in-house chips. So yes, free cash flow fell to $5 billion, but Bernstein called the move fashionably late and welcome. And now this raises the bar for Microsoft and Amazon heading into earnings next week. Microsoft's fiscal quarter, fiscal year just wrapped up at the end of June, so we'll be looking to see if they revise up from their $80 billion CapEx spend commitment. Guys? Yeah, well, that'll be interesting to see if the, if the race can accelerate even from these lofty levels. I was taken by the title of this report out of Roth about Alphabet, Big G, as they call them, wants its AI crown back. And that's such a marked turn from the discussions we were having about existential risk a couple of months ago. It absolutely is. And while Amazon is still the cloud leader, that dominance is being challenged. You have analysts noting that as enterprise AI demand grows, spend is increasingly shifting toward rivals like Google, a trend that could definitely reshape that hyperscaler landscape. And Alphabet really did deliver a standout quarter for cloud. Revenue jumped 32%. That was well above expectations and accelerating from 28% growth last quarter. We see it as a major validation of Google's AI infrastructure push, especially given those rising CapEx commitments. Right. And in the meantime, things like YouTube and Waymo kind of get lost in the shuffle. There's just so much to digest in a short period of time. Mac, appreciate that important print on Alphabet.

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Jerusalem

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Bangkok

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Ukraine Invasion

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