Google's $85 Billion AI Investment: A Push for Employee Productivity and Market Dominance

Google execs say employees have to 'be more AI-savvy' as competition ramps up

Alphabet CEO Sundar Pichai during the Google I/O developers conference in Mountain View, California, on May 10, 2023. Google executives are pushing employees to act with more urgency in their use of artificial intelligence as the company looks for ways to cut costs. That was the message at an all-hands meeting last week, featuring CEO Sundar Pichai and Brian Saluzzo, who runs the teams building the technical foundation for Google's flagship products. "Anytime you go through a period of extraordinary investment, you respond by adding a lot of headcount, right?" Pichai said, according to audio obtained by CNBC. "But in this AI moment, I think we have to accomplish more by taking advantage of this transition to drive higher productivity." In its earnings report last week, Alphabet said it plans to spend $85 billion on capital expenditures in 2025, up from the $75 billion it was targeting earlier in the year. It's a theme that's resonating across technology, where internet giants are racing to build costly data centers to run big AI models and workloads while simultaneously cutting expenses elsewhere. "We are competing with other companies in the world," Pichai said at the meeting. "There will be companies which will become more efficient through this moment in terms of employee productivity, which is why I think it's important to focus on that." In June, Amazon CEO Andy Jassy said the company's corporate workforce will shrink in the coming years as it adopts more generative AI tools and agents. In an email to employees, Jassy wrote that employees should learn how to use AI tools and experiment and figure out "how to get more done with scrappier teams."

Google's AI Master Plan in One Number

Alphabet, the parent company of Google, delivered a standout quarterly report on Wednesday, with robust growth across Search, YouTube, and Cloud. But buried beneath the strong revenues was a number that tells a much bigger story about the future of technology: $85 billion. That is Google’s new budget for capital expenditures this year, a stunning $10 billion increase from its previous February's forecast. This colossal sum is being poured into the physical foundations of artificial intelligence: building more data centers, accelerating their construction, and filling them with tens of thousands of specialized servers and custom-designed chips. It is proof that the price of competing in the AI era is a full-scale infrastructure war, and Google is determined to win it by out-building everyone else. The reason for this massive spending is simple: demand for AI is growing at a nearly incomprehensible rate. CEO Sundar Pichai provided, in remarks recorded by the company, a metric to make this abstract concept tangible. In May, Google’s systems processed 480 trillion "tokens," the basic units of data that AI models like Gemini use to read, write, and reason. Just a few months later, that number has more than doubled to 980 trillion monthly tokens. This exponential growth is a computational tidal wave, and it requires a physical response. Every AI-generated image, every summarized document, and every conversational response from the Gemini app consumes immense processing power. To meet this demand, Google is in a constant race to build the digital factories where this work happens. Chief Financial Officer Anat Ashkenazi explained, during the call with analysts, the spending hike is driven by "additional investment in servers, the timing of delivery of servers, and an acceleration in the pace of data center construction, primarily to meet cloud customer demand." What sets Google apart in this arms race is its strategy of owning the entire technology pipeline, what Pichai calls a "differentiated, full-stack approach to AI." This means Google not only designs the world’s most advanced AI models but also controls the physical infrastructure they run on. This includes its global network of AI-optimized data centers and, crucially, its own custom-designed Tensor Processing Units (TPUs). These are specialized chips built for the exact kind of mathematics that powers AI, giving Google a significant advantage in both performance and cost over competitors who must rely on more general-purpose chips from third parties. This control over the "full stack" creates a powerful competitive moat. While other companies, even major AI labs, must rent their computing power, Google owns the factory. This is why, as Pichai noted, "nearly all gen AI unicorns use Google Cloud," and why advanced research labs are specifically choosing Google’s TPUs to train their own models. OpenAI recently said that it expected to use Google’s cloud infrastructure for its popular ChatGPT service. The $85 billion bet is about more than keeping up with demand. It is a long-term strategy to build and control the foundational layer of the next era of computing. By investing so heavily in the digital equivalent of roads, power grids, and factories, Google aims to ensure its dominance for the next decade. Any company that wants to build a significant AI application will, in some way, likely have to run it on infrastructure built by Google. Even with this massive spending, the company is still racing to keep up. Ashkenazi delivered a crucial warning that Google expects to "remain in a tight demand-supply environment going into 2026." This reveals the sheer intensity of the AI arms race. The demand for AI compute is so ferocious that even a company spending $85 billion in a single year is struggling to build fast enough. Google’s message is clear: The AI revolution will not be built on code alone. It will be built on a foundation of silicon, fiber optics, and concrete. The $10 billion spending increase is the non-negotiable price of victory, a down payment on a future where Google doesn’t just lead in artificial intelligence, but owns the planet it runs on.

Alphabet's $85 Billion A.I. Blitz Puts Silicon Valley on Notice

Earlier this year, Alphabet sent Wall Street into a panic when it unveiled plans to spend a staggering $75 billion on A.I. investments in 2025. Now, the Big Tech player is taking its spending spree one step further as it prepares to invest an additional $10 billion throughout the year, bringing its total predicted capital expenditures to $85 billion. These funds will not only flesh out the Google parent company's A.I. infrastructure needs and meet a surge in customer demand for its products, but help fund the demand for new talent amid an all-out hiring war brewing in Silicon Valley. Sign Up For Our Daily Newsletter Sign Up Thank you for signing up! By clicking submit, you agree to our <a href="http://observermedia.com/terms">terms of service</a> and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime. See all of our newsletters "It's exciting to see the traction," said Sundar Pichai, CEO of Alphabet and Google, of his company's A.I. efforts during its second-quarter earnings call on Wednesday (July 23). "We'll continue investing in the people, talent and compute needed to make sure that we are set up for the opportunity ahead." Alphabet reported revenues of $96.4 billion for the April-June quarter, surpassing analyst expectations and representing a 14 percent year-over-year increase. The bulk of this figure came from its Google Services division, which includes Google's search business and totaled $82.5 billion worth of sales during the quarter. Revenue also jumped across its Google Cloud and Other Bets departments. The tech behemoth's quarterly profit, too, exceeded Wall Street's predictions and climbed to $28.1 billion compared to $23.6 billion last year. Progress was also recorded across the A.I. front, with Alphabet's Gemini A.I. model and AI Overviews search tool continuing to grow in popularity. The Gemini app now has more than 450 million monthly active users, while Alphabet's A.I.-generated search summaries are used by more than 2 billion monthly customers and have become especially well-received by younger viewers, said Pichai. That growth doesn't come without a cost. Alphabet's capital expenditures for the second quarter came in at $22.4 million compared to the $17.2 billion it spent between January and April. Its ballooning investments are expected to carry on into next year. "Looking out to 2026, we expect a further increase in capex due to the demand we're seeing from customers as well as growth opportunities across the company," Anat Ashkenazi, Alphabet's chief financial officer, told analysts. Some of those customers include Mattel, the toymaker behind Barbie, which is using Alphabet's A.I. features to review and act on product feedback, said Pichai. Other clients, such as Target, have tapped Gemini to improve cybersecurity services, while Wayfair is personalizing customer experience with the help of Alphabet's A.I.-integrated databases. Alphabet isn't the only Big Tech player ready to open its wallet amid the ongoing A.I. revolution. Microsoft is expected to invest some $80 billion in the new technology in 2025, while Amazon will spend around $100 billion, and Meta's costs could reach as high as $72 billion. For some of the leading A.I. developers, heightened investments will include attempts to reinvent the wheel when it comes to how customers will interact with A.I. going forward. Meta, for example, is currently focused on pushing its Ray-Ban smart glasses. Over at OpenAI, the ChatGPT developer has tapped Jony Ive to develop an entirely new line of devices tailored for the emerging technology. Earlier this year, Alphabet announced a $75 million investment in Warby Parker to fund the development of smart glasses, a partnership that Warby Parker co-founder Neil Blumenthal evangelized for the potential to "enhance our everyday lives." Blumenthal noted the parallels between eyewear and technology, which "are core parts of our identity and daily experience." Google and Warby Parker "share a commitment to leverage design, utility, and innovation to build products to help customers in every aspect of life," Blumenthal said. Despite Pichai's shared excitement over such "emerging categories" in A.I. devices, Pichai warned analysts that he believes phones will remain "at the center of the experience for the next two to three years, at least." Besides competing on the device front, Big Tech's leaders are also currently embroiled in an aggressive talent war that recently saw Meta poach a trove of researchers from rivals Google, OpenAI and Anthropic. Investing in talent will be a component of Alphabet's A.I. spend, said Ashkenazi, who noted that the company expects an increase in headcount additions throughout the year. "We've gone through these moments before," said Pichai when asked about Silicon Valley's A.I. hiring push. Alphabet's retention and hiring metrics remain healthy for the time being, he said. "I do know individual cases can make headlines, but when we look at numbers deeply I think we are doing very well."

Sundar Pichai Tells Employees To Embrace AI Or Fall Behind As Google-Parent Prepares For $85 Billion Spending Surge - Alphabet (NASDAQ:GOOG), Amazon.com (NASDAQ:AMZN)

Google-parent Alphabet Inc. GOOG GOOGL CEO Sundar Pichai has urged employees to ramp up their use of artificial intelligence, saying the company must boost productivity amid plans for $85 billion in capital expenditures this year. What Happened: At an all-hands meeting last week, Pichai told staff that the era of adding headcount to scale operations is over, and that Google must now "accomplish more," reported CNBC, citing an audio of the meeting. "Anytime you go through a period of extraordinary investment, you respond by adding a lot of headcount, right?" Pichai stated, adding, "But, in this AI moment, I think we have to accomplish more by taking advantage of this transition." "We are going to be going through a period of much higher investment and I think we have to be frugal with our resources," he continued. See also: Elon Musk Loses $34 Billion As Tesla Sheds $153 Billion Amid Feud With Trump -- Here's How The Billionaire's Fortune Has Fared So Far In 2025 Brian Saluzzo, head of Google's infrastructure teams, highlighted urgency in making employees "more AI-savvy," citing internal tools like "Cider," an AI coding assistant now used weekly by 50% of its users, the report said. Google has also launched "AI Savvy Google," an internal training hub with toolkits and Gemini-based courses built in partnership with DeepMind. Why It's Important: As Google ramps up AI spending -- up from $75 billion to $85 billion in 2025 -- the tech giant is also trying to cut costs by making its workforce more efficient. The push comes as competitors like Amazon.com, Inc. AMZN, Microsoft Corporation MSFT, and Shopify Inc. SHOP demand similar AI adoption from employees. Trending Investment OpportunitiesAdvertisementArrivedBuy shares of homes and vacation rentals for as little as $100. Get StartedWiserAdvisorGet matched with a trusted, local financial advisor for free.Get StartedPoint.comTap into your home's equity to consolidate debt or fund a renovation.Get StartedRobinhoodMove your 401k to Robinhood and get a 3% match on deposits.Get Started Earlier this month, Yahoo Japan also mandated its 11,000 employees to integrate generative AI into their daily routines, aiming to double productivity through automation by 2028, reported TechRadar. The rise of AI-powered automation has also accelerated layoffs in the tech sector, with up to 80,000 employees affected. Microsoft alone cut 15,000 jobs while committing $80 billion to new AI investments. Price Action: In after-hours trading, Alphabet Inc.'s Class A shares slipped 0.27% to $195.23, and Class C shares edged down 0.14% to $196.15, according to Benzinga Pro data. Benzinga's Edge Stock Rankings show that GOOG maintains strong upward momentum across short, medium and long-term periods. Additional performance metrics can be found here. Read next: Apple May See Fewer Searches In Safari, But Google CEO Sundar Pichai Insists AI Is Fueling Overall Query Growth: 'Far From A Zero-Sum Game' Photo Courtesy: JHVEPhoto on Shutterstock.com Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. AMZNAmazon.com Inc$231.24-0.67%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum70.22Growth97.28Quality69.47Value49.29Price TrendShortMediumLongOverviewGOOGAlphabet Inc$196.151.41%GOOGLAlphabet Inc$195.231.38%MSFTMicrosoft Corp$513.750.24%SHOPShopify Inc$124.28-2.02%Market News and Data brought to you by Benzinga APIs