Alphabet’s AI risks deepen as filing reveals $98 billion in commitments beyond the $1 trillion spending

Google parent Alphabet's financial risks related to its artificial intelligence expansion extend beyond the $1 trillion plus in spending commitments it disclosed earlier, and sits at around $98.5 billion as of the September quarter as per its latest regulatory filing, according to a Bloomberg report.

The filing on Thursday shows Alphabet could face another $98.5 billion in contingent commitments under certain conditions, up about $23 billion from the previous quarter. These include guarantees for data centre leases, financial backing for partners buying power equipment and potential obligations to repurchase AI chip systems from customers.

The disclosures come as investors scrutinise whether surging AI expenditure will generate adequate returns.


Also Read: Nasdaq slides over 1% as Alphabet's AI spending revives investor concerns

Cloud backlog raises questions over growth quality

Google Cloud’s backlog climbed to $560.8 billion at the end of September from $513.9 billion three months earlier. However, $16.8 billion of the backlog is linked to Crux AI, a joint venture Alphabet established with Blackstone, according to the filing cited by Bloomberg.

Alphabet owns a minority stake in the venture and has pledged up to $10 billion in data centre and energy backstops to support it.

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The arrangement raises questions about how much of the cloud division’s growth comes from independent customers rather than businesses backed by Alphabet itself.

“It does kind of take a little bit of the luster off,” said Dan Morgan, senior portfolio manager at Synovus Trust, as quoted by Bloomberg. “It would be nice if it was coming from a bunch of outside customers. That is something that you do have to raise an eyebrow about — is this a self fulfilling prophecy?”

Search monetisation and AI commitments add pressure

The filing also highlights challenges in Alphabet’s core advertising business, which helps finance its AI expansion. Paid clicks on Google Search grew 8% in the third quarter, slowing from 13% in the previous quarter, despite Chief Executive Officer Sundar Pichai saying query growth was the fastest in five years.

Chief Business Officer Philipp Schindler said AI Mode queries affected revenue because of “the lower monetization” of those queries. Alphabet is expanding advertising in AI Mode, including into international markets.

Other disclosures underline the scale of its AI related exposure. Alphabet may have to repurchase up to $6.6 billion in AI chip systems from customers, while energy guarantees more than doubled to $16.2 billion, Bloomberg reported.

The company also acknowledged that autonomous agents had sometimes taken actions “outside of their intended scope” during model testing, as it prepares to expand agent capabilities in Gemini.

Together, the disclosures give investors a broader picture of the financial and operational risks accompanying Alphabet’s AI ambitions.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)