Google parent Alphabet, in its annual financial report last week, highlighted the potential impact of artificial intelligence on its advertising business and noted that huge commitments in the field could leave the company with some “excess capacity”, as per a CNBC report.
During the analyst call, too, CEO Sundar Pichai told stakeholders that “compute capacity” was a matter of concern for executives. “Power, land, supply chain constraints, how do you ramp up to meet this extraordinary demand for this moment?” he added, the CNBC report added.
Concerns over AI? What Alphabet said…
“To meet the compute capacity demands of AI training and inference, as well as traditional cloud computing services, we are entering into significant leasing arrangements with third-party operators, which may increase costs and operational complexity. Large commercial agreements could also increase liabilities and obligations in the event of nonperformance by us, our counterparties, or vendors,” Alphabet said in the filing with the United States Securities and Exchange Commission (US SEC).
There is also concern over Google's own AI product (Gemini AI) cannibalizing Search and impacting its ad business revenues as less people use the tool. This too was acknowledged in the filing, the CNBC report added. “We and our competitors are constantly adjusting to meet this shift and provide new and evolving advertising formats. There is no assurance that we will adapt effectively and competitively to meet this shift, and that such advertising formats, strategies, and offerings will be successful,” it stated.
Google's Q4 ad revenue increased 13.5% from a year earlier to $82.28 billion, showing that so far, it has managed to stave off most of the impact.
Notably, the tech giant raised $20 billion in its biggest-ever US dollar bond sale on 9 February, as it seeks to fund AI-related ambitions, Bloomberg reported, citing sources. Alphabet didn’t respond to queries, it added.
Alphabet's biggest-ever US dollar bond sale — All we know
Alphabet is borrowing “far and wide” to finance its sprawling AI ambitions. According to a Bloomberg report citing sources, the company originally intended to raise $15 billion but raised $20 billion in its biggest-ever US dollar bond sale on Monday.
Besides this, first-time deals are also being planned in the UK and Switzerland, including a rare sale of 100-year bonds — marking the first time a tech company has tried such an offering since the dotcom frenzy of the late 1990s, the report added.
It reported that Alphabet last week said it’s planning for as much as $185 billion in capex this year, more than it has spent in the past three years combined, as it invests heavily in data centres critical to its AI ambitions. The company said the investments are already boosting revenue, as AI encourages more online searching.
(With inputs from Bloomberg)
