Google burns through cash with AI spending

Google parent Alphabet has seen its business continue to grow in recent months, but growing spending on artificial intelligence (AI) infrastructure has pushed cash flow into negative territory.

The company’s free cash flow, the cash it retains after paying for operations and investments, came in negative for the first time in at least a decade to $5.9bn (£4.3bn), according to previous financial filings.

Alphabet’s spending on AI is now expected to reach $205 billion, up from $190 billion, according to major tech companies. Race to build Around the new wave of technology.

Meanwhile, Alphabet’s combined quarterly revenue reached $119.8 billion, up 23 percent from the same period last year.

But the company’s stock was down 4% in after-hours trading.

In a call with financial analysts, Google’s chief financial officer, Anat Ashkanazi, said the company had negative cash flow due to growing capital spending, all of which is related to AI spending.

The company said it spent $45 billion in the second quarter, with 60 percent going to servers and the remaining 40 percent to data centers.

Alphabet’s capital expenditures in the first quarter of this year were $36 billion.

“The demand still outstrips that investment,” Ashkanazi said when it comes to AI on the call.

“As long as we see these investment opportunities, we will continue to invest.”

Google CEO Sundar Pichai said the technology shift to AI tools and capabilities still “looks like the first innings of a shift in many areas” and that the company’s plans to generate financial returns on spending are “disciplined.”

“What I’m seeing with what you’re doing with Frontier Capability, there’s still a lot of work to be done to translate that into our users’ experience. So that looks like a rare opportunity with extraordinary returns.”

Tesla, which controls the electric vehicle company Elon MuskIt reported negative free cash flow on Wednesday of $1.1 billion for the second quarter due to its own rising investment costs.

According to its financial records, it was the first time the company had shown a negative cash balance in two years.

Tesla’s chief financial officer, Vaibhav Taneja, said in a call with analysts that the company will spend up to $25 billion this year, more than double its capital spending by 2025.

He added that Tesla was in the midst of a “big investment cycle” and that spending would likely continue to increase over the next three years.

Tesla shares were down 4% in after-hours trading.