Daijiworld Media Network – San Francisco
San Francisco, Feb 10: Google’s parent company Alphabet has flagged potential risks arising from its aggressive push into artificial intelligence, warning that heavy investments in the sector could strain resources and even impact its core advertising business, according to a report by CNBC.
In its annual financial filing submitted last week, Alphabet highlighted concerns over “compute capacity” — a key requirement for AI training and inference — noting that massive commitments could result in “excess capacity” in certain scenarios. The company also cautioned that the rapid expansion of AI infrastructure may increase costs and operational complexity.
Speaking during an analyst call, Alphabet CEO Sundar Pichai acknowledged the challenges executives are grappling with as demand for AI surges. “Power, land, supply chain constraints — how do you ramp up to meet this extraordinary demand for this moment?” Pichai said, as quoted by CNBC.
Alphabet disclosed that to meet the growing compute needs of artificial intelligence workloads and traditional cloud services, it has entered into significant leasing arrangements with third-party data centre operators. The company warned that such arrangements could raise costs and expose it to additional liabilities in case of non-performance by vendors or partners.
“There is also concern that large commercial agreements could increase liabilities and obligations,” Alphabet stated in its filing with the United States Securities and Exchange Commission (US SEC).
The company further acknowledged the risk of its own AI offerings, including Gemini AI, potentially cannibalising Google Search — a core revenue driver — and impacting advertising income if users increasingly turn to AI-generated responses instead of traditional search results.
“We and our competitors are constantly adjusting to meet this shift and provide new and evolving advertising formats,” the filing said. “There is no assurance that we will adapt effectively and competitively.”
Despite these concerns, Alphabet’s advertising business remains resilient for now. Google’s fourth-quarter advertising revenue rose 13.5 per cent year-on-year to USD 82.28 billion, indicating limited impact so far.
Meanwhile, Alphabet is borrowing heavily to finance its AI ambitions. According to a Bloomberg report, the company raised USD 20 billion on February 9 in its largest-ever US dollar bond sale, exceeding its initial target of USD 15 billion. Alphabet did not respond to queries on the matter, Bloomberg added.
The report further noted that Alphabet is exploring first-time bond deals in markets such as the UK and Switzerland, including a rare 100-year bond issuance — a move not seen from a technology firm since the dotcom era of the late 1990s.
Alphabet recently announced plans to spend up to USD 185 billion in capital expenditure this year alone, more than what it spent over the past three years combined, largely to build data centres critical to its AI expansion. The company said these investments are already driving revenue growth, as AI tools encourage increased online search activity.