"The Shock of Google's 85 Trillion Yen Investment ─ The 'Next 10-Year Plan' to Conquer the World with AI and Cloud"

1. What the figure "85B dollars" represents

On July 24, Alphabet revised its 2025 CAPEX guidance upward from $75 billion to $85 billion, a news that had a greater impact on the market than the earnings figures. The investment in cloud/AI infrastructure represents a 13% increase year-over-year, putting it on par with similar plans announced by Microsoft and Amazon Web Services.

2. Not a cost, but an "engine for growth"

About 70% of the investment is expected to be allocated to data centers and in-house developed chips (TPU/Axion). In the second quarter, Google Cloud's revenue increased by 32%, and its operating profit margin returned to double digits. CEO Sundar Pichai emphasized that "demand exceeds supply," highlighting that the additional investment is not a "defensive" move but an "offensive" one.

3. Rapid expansion of Gemini/AI Mode

The company reported that its generative AI "Gemini," released at the beginning of the year, has reached

450 million MAUs, and the corporate AI Mode has reached 100 million MAUs. As a pioneer that created the Transformer, the company is beginning to make a comeback. The growth in these user numbers justifies the strain on computing resources and the additional CAPEX.

4. The stability of the advertising business as a support

Even as the AI shift appears as a "cost increase," Google Ads showed a solid 10.4% revenue growth, countering concerns that the implementation of generative AI would cannibalize search ads. This also sent a positive signal to ad-dependent companies like Meta and Snap.

5. Analysts are bullish, but undervalued

Mark Shmulik from Bernstein praised the move as "showing the 'offensive stance' that investors were looking for." In fact,

27 securities firms raised their target stock prices, but the stock price remained at +0.5% year-to-date, with a P/E ratio of 18.9, significantly lagging behind Microsoft's (33 times).

6. Social media is "50% bullish, 50% cautious"

On Reddit's r/ValueInvesting, opinions are divided with comments like "Cloud demand is tremendous, and even $85B may not be enough" (Superb_Use_9535) and "Is there a guarantee that search ads won't be cannibalized?" (hidde1301). The discussion is centered more on the "timing of returns" rather than the "magnitude" of the investment.

Meanwhile, on X (formerly Twitter), financial influencers quickly reported that "CapEx guidance significantly exceeded the market expectation of $73B," with posts mentioning the rise of semiconductor stock Broadcom ($AVGO) as a contributing factor spreading widely.

X (formerly Twitter)

 

7. Evaluation axes spreading to semiconductors, renewable energy, regulations...

• Semiconductors: The increase in TPU orders is a tailwind for TSMC/Samsung as well as Intel Gaudi, a collaboration partner.

• Renewable Energy: Google has declared its commitment to 100% renewable energy procurement. It is expected to expand investments in wind power-adjacent data centers, boosting the ROI of renewable energy development companies.

• Regulatory Risks: Amidst increasing pressure from the EU's Digital Markets Act and the US Department of Justice to break up its advertising business, the increase in CAPEX could be perceived as "strengthening monopoly."

8. Scenarios for investment recovery

CAPEX is equivalent to 2.1 times the 2026 EBITDA. The recovery point on DCF is expected to be around 2027-28.

9. Redrawing the competitive landscape

Microsoft suggests an annual CAPEX of over $80 billion, and AWS hints at $108 billion, with a total infrastructure investment of approximately $300 billion concentrated in 2025 among the three companies. This will intensify the competition for power, water resources, and land, impacting regional economies.

10. Conclusion: Testing the market's "Alphabet 2.0"

The $85 billion is not a "defensive cost" but a "preemptive investment in the next-generation revenue engine." However, until there is confidence that AI integration will not damage the "cash cow" of search ads, the market is likely to continue postponing a full evaluation. Overall, it seems to settle on an evaluation as **"for long-term holders."**