Alphabet praises DeepSeek, but it’s massively ramping up its AI spending

Booming AI budgets seemed at risk last week when DeepSeek crashed Nvidia’s stock based on speculation that its cheaper AI models would lower demand for AI chips and data centers.

Alphabet CEO Sundar Pichai has certainly noticed the Chinese AI company, praising its work as “tremendous” in Alphabet’s latest earnings call (while adding that some of Gemini’s models are just as efficient).

But just like Meta, Alphabet isn’t throwing down the towel in Big Tech’s AI spending wars. In its latest earnings report, Alphabet announced it would boost capital expenditures to $75 billion this year — a whopping 42% increase — to accelerate its AI progress.

Alphabet is betting that cheaper AI will massively boost demand for its services, rather than making it basically free and threatening its business models. The company noted it stands to benefit from this rise in usage — known as inference — thanks to its billions of existing users.

“Part of the reason we are so excited about the AI opportunity is we know we can drive extraordinary use cases because the cost of actually using it is going to keep coming down, which will make more use cases feasible,” Pichai said during the earnings call. “And that’s the opportunity space. It’s as big as it comes, and that’s why you’re seeing us invest to meet that moment.”

Meta CEO Mark Zuckerberg made similar comments in Meta’s earnings call last week, pledging to spend “hundreds of billions” on AI in the long term despite all the DeepSeek buzz.

Whether this all pans out is unclear, but for now, tech giants can afford the AI bills, and when (or if) they’ll slow down is anyone’s guess.