Finance
Alphabet shares fall as cloud growth concerns and AI spending rattle investors
Published by Global Banking and Finance Review
Posted on February 5, 2025
3 min readLast updated: January 26, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on February 5, 2025
3 min readLast updated: January 26, 2026
Alphabet shares fell 8% as cloud growth slowed and AI spending increased, raising investor concerns about Big Tech costs.
By Deborah Mary Sophia
(Reuters) - Alphabet shares fell 8% on Wednesday as investors balked at the Google parent's slowing cloud growth and planned $75 billion capital spending for the year, underscoring growing fears over Big Tech's escalating artificial intelligence costs.
The company was on course to lose roughly $180 billion in market value and erase all its stock price gains for the year if the losses hold.
The dour report also pulled down shares of cloud rival Amazon.com, which reports earnings on Thursday.
Alphabet reported a 30% rise in quarterly revenue from its cloud business that was slower than the 35% jump seen in the prior quarter and also fell short of market expectations, mirroring the weakness seen at larger cloud rival Microsoft.
Analysts said the results signified a "big shift" in Google's business - from being a capital-light, high-margin search advertising business to a capital-intensive, more competitive AI company.
Its projected 2025 outlay also came in 29% above estimates.
The company said it will prioritize expensive AI investments over the risk of falling behind competitors, which has unsettled investors looking for a clearer route to AI-driven profits.
"Google seems to be falling into the same trap Microsoft has fallen into the last few quarters ... If this is the new trend for Alphabet, then investors should be worried," said D.A. Davidson analyst Gil Luria.
The massive capex ramp comes at a time when China's DeepSeek low-cost AI model has led to more pointed questions about Big Tech's multibillion-dollar AI development spending.
Last week, Microsoft and Meta Platforms executives defended their hefty AI spending plans, saying it was crucial to staying ahead in the new field.
"This (CapEx) is a significant increase, and it shows that Alphabet is throwing the kitchen sink at its AI plans," said Kathleen Brooks, research director at trading platform XTB.
The spending concerns also overshadowed better-than-expected revenues at Google's mainstay ads business, which showed signs of strength despite an uptick in competition from social media companies including Meta.
"This is Google being perfect on their most critical key performance indicator and we've still got a stock down 7-8% ... Investors have decided that Google needs to gain cloud share to be viewed as an AI winner," Bernstein analyst Mark Shmulik wrote.
At least ten brokerages cut their price target on Alphabet's stock, while two analysts lifted the targets, bringing the median target to $217, according to LSEG data. That compares with the stock's price of $192.7 in early trading.
Alphabet's shares are the cheapest of the major three U.S. cloud providers, with a 12-month forward price-to-earnings ratio of 22.7. Amazon's is nearly 39 and Microsoft's is 29.
(Reporting by Deborah Sophia and Joel Jose in Bengaluru and Alun John in London; Editing by Amanda Cooper, Savio D'Souza and Tasim Zahid)
The main topic is Alphabet's share decline due to concerns over slowing cloud growth and increased AI spending.
Shares fell due to slower cloud growth and a $75 billion AI spending plan, worrying investors.
Cloud growth slowed to 30%, below expectations, impacting investor confidence.
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