Key Takeaways Shares of Google parent Alphabet tumbled Wednesday amid worries about whether the tech giant's spending on AI will pay off. Several analysts lowered their price targets for the stock, citing concerns about the company's weaker-than-expected cloud growth and plans to ramp up spending on AI.

Alphabet, parent company of search giant Google, said it will spend $75 billion in 2025 in the AI arms race, raising investor concerns.

Meanwhile, the company expects the launch of its new Gemini 2.0 AI model to help drive growth as it moves closer to being a universal assistant. The model has more advanced multimodal and agentic capabilities and will also be used to power its AI Overviews within search. It said its consumer Gemini app is also gaining traction.

Alphabet said on Tuesday it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, while posting cloud revenue that missed analysts' target. The tech giant's shares were down 9% in extended trading.

Excluding traffic acquisition costs, that figure was $81.6bn, missing Wall Street estimates in a Bloomberg poll of $82.8bn. Net income rose 28 per cent to $26.5bn. Alphabet shares dropped more than 6 per cent in after-hours trading.

Cloud revenue in the quarter of $12 billion—a 30% increase from last year—just misses analysts’ estimates of $12.2 billion.

(Reuters) -Alphabet missed Wall Street estimates for quarterly revenue on Tuesday, in a sign the Google parent was taking a hit from increased competition in the digital advertising market and a slowdown in its cloud computing business.

Generally speaking, investors do not appreciate slowing growth, as it suggests higher valuations (which are reflected in the share price) cannot be maintained or increased over longer periods. Even so,

Alphabet said Tuesday it will spend $75 billion on its AI buildout this year, 29% more than Wall Street expected, while posting cloud revenue that missed analysts’ target. The tech giant’s shares were down more than 7% in extended trading.