NewYork (Business Emerge), July 25: Alphabet Inc. experienced a notable decline of over 3% on Wednesday, primarily driven by apprehensions regarding its growing expenditures on artificial intelligence (AI) infrastructure and increased competition for advertising revenue on YouTube.
The tech giant’s capital expenditures surged to $13.2 billion in the second quarter, surpassing forecasts. This substantial investment is aimed at bolstering the infrastructure required to support generative AI technologies and maintain competitiveness against rivals such as Microsoft.
Despite Alphabet’s efforts to curb expenses through workforce reductions, analysts predict that heightened seasonal hiring of recent graduates and the early launch of its Pixel devices could adversely affect its margins in the third quarter.
YouTube, Alphabet’s video-streaming platform, is contending with challenging year-on-year comparisons and fierce competition in the online advertising sector from major players like Amazon.com.
In the second quarter, YouTube’s ad revenue grew by 13%, a deceleration from the nearly 21% increase observed in the previous quarter. Bernstein analysts noted, “Management has expressed a cautious outlook for the latter half of the year. This could be a strategic move to set a low benchmark for the incoming CFO or a reflection of genuine concerns about slowing growth and rising costs in the digital advertising space.”