Alphabet Inc. shares closed Friday's session down 2.5% at $322.86, notably lagging a broader technology sector advance. The decline came as investors digested reports suggesting the Google parent company could nearly double its capital expenditures on artificial intelligence infrastructure this year.
While major indices finished higher, with the Dow Jones Industrial Average closing above 50,000 for the first time, Alphabet's performance stood out negatively. Market focus appears to be shifting from the promotional potential of AI toward the substantial capital required to build and maintain these systems, placing fresh scrutiny on cash flow projections for major technology firms.
Equity analyst Aarin Chiekrie of Hargreaves Lansdown noted that despite solid fundamentals in Alphabet's cloud segment, investor attention is fixed on what he described as "ballooning" investment plans. The concern centers on whether rapid revenue gains can outpace a significant spike in capital expenditures for data centers, servers, and semiconductors.
Mark Hawtin, head of global equities at Liontrust, emphasized that "spending for spending's sake" is no longer sufficient for investors, who now demand a clearer line of sight between capital outlays and future profitability. Analysts at MoffettNathanson warned that the "margin of error is shrinking" for hyperscale cloud providers like Alphabet.
Attention now turns to upcoming macroeconomic data, with the postponed January U.S. jobs report scheduled for release on Wednesday, followed by the Consumer Price Index (CPI) reading for January on Friday morning. These figures could influence interest rate expectations and further impact valuations for growth-oriented technology stocks.
