Alphabet’s AI option casts tempting spell
Alphabet 
GOOG may have three classes of shares, but its value increasingly rests on a tantalizing artificial intelligence option. Google’s parent company unveiled plans on Wednesday to boost capital expenditure this year by 13% alongside strong web search results. Compared to rivals chasing machine-learning riches, the online advertising juggernaut has become a bargain.
Boss Sundar Pichai ratcheted up the arms race for data centers and such by raising his budget to $85 billion, 60% more than in 2024. The enlarged figure represents about a fifth of expected sales, according to Visible Alpha, but it’s also a lower proportion than the 36% at Meta Platforms 
META using the $72 billion it said it would dedicate to such outlays.
Spending on AI is eating into Alphabet’s free cash flow, which tumbled 61% in the quarter ended June 30 from a year earlier. Even so, the company held steady in other areas, accelerating revenue growth at YouTube and its cloud computing service. Moreover, ads related to search queries increased 12% from second-quarter 2024, faster than the 10% jump in the first quarter.
There are reasonable concerns about Alphabet’s ability to stay dominant as people use chatbots more and more to retrieve information. Just before the company reported its results, the Pew Research Center published a survey indicating that web users are less likely to click on a link when they encounter an AI summary.
Also weighing on the valuation is a worry that U.S. trustbusters will succeed in breaking up the $2 trillion company. It trades at less than 20 times expected earnings for the year, below its 10-year average and a discount to Microsoft’s 
MSFT 25 times and the 38 times fetched by Meta. The numbers spell upside at Alphabet.
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CONTEXT NEWS
Alphabet said on July 23 it was raising capital expenditure for 2025 to $85 billion, a 60% increase from 2024 and $10 billion more than it previously flagged.
The parent of Google reported a 19% increase in second-quarter net income from a year earlier, to $28 billion, on a 14% increase in revenue.
