Alphabet Returns to Debt Markets as AI Spending Soars, Warning of New Risks to Ads and Excess Capacity

Alphabet’s AI spending spree is reshaping its balance sheet, risk profile, and core business model, marking a turning point in how even Big Tech funds and manages growth.

Alphabet is turning again to the debt market to help bankroll one of the most aggressive artificial intelligence investment drives in corporate history, while simultaneously flagging fresh risks tied to the technology’s rapid rise and the sheer scale of its infrastructure buildout.

The renewed trip to the debt market is seen as a signal that the artificial intelligence boom has reached a scale where even one of the world’s most cash-generative companies is rethinking how it finances growth — and openly acknowledging the risks that come with it.

In its latest annual filing, released alongside earnings, the Google parent laid out a more cautious narrative around AI than investors have been accustomed to hearing. While executives continue to frame AI as a once-in-a-generation opportunity, the company also warned that the speed, cost, and uncertainty of the buildout could strain operations, expose it to financial liabilities, and, in a worst-case scenario, leave it sitting on underutilized infrastructure.

That backdrop explains why Alphabet is preparing to raise about $20 billion through a multi-tranche bond sale, including an ultra-long 100-year sterling bond, according to people familiar with the deal quoted by CNBC. Demand has been strong, with the offering reportedly several times oversubscribed, underscoring how eager investors remain to lend to top-tier technology names even as borrowing rises.

The fundraising follows a $25 billion bond sale late last year and caps a sharp pivot in Alphabet’s capital structure. Long-term debt quadrupled in 2025 to $46.5 billion, a striking shift for a company that, for years, relied overwhelmingly on internal cash flows. The reason is simple: the scale of AI investment now dwarfs what operating cash alone can comfortably support without trade-offs.

Alphabet said it may spend up to $185 billion in capital expenditures this year, more than double its 2025 outlay. That figure places it firmly among the biggest corporate spenders on infrastructure in history. The money is being poured into data centers, specialized chips, custom silicon, power generation, cooling systems, and high-capacity networking — all essential to training and running large language models such as Gemini.

Yet the filing makes clear that this is not just about owning servers. Alphabet is increasingly relying on long-term leasing arrangements with third-party data-center operators to secure capacity quickly. While this approach accelerates deployment, it also raises costs and complexity, and creates contractual obligations that could become a burden if demand forecasts miss the mark.

Large commercial agreements, the company warned, could increase liabilities if Alphabet or its partners fail to perform. This is a notable admission in an industry that has largely emphasized upside while downplaying execution risk.

Management is keenly aware of the tension. Chief financial officer Anat Ashkenazi told analysts the company wants to invest “in a fiscally responsible way” and preserve a strong financial position. But when CEO Sundar Pichai was asked what worries him most, his answer was blunt: compute capacity. Power availability, land, supply chains, and the pace of expansion now dominate the strategic agenda.

Alphabet’s predicament mirrors a broader shift across Big Tech. Microsoft, Meta, and Amazon are all dramatically increasing capital spending, and together with Alphabet are projected to lift capex by more than 60% this year compared with already record levels in 2025. The collective outlay is fueling what Nvidia CEO Jensen Huang has described as the largest infrastructure buildout in human history.

For Alphabet, however, the stakes extend beyond infrastructure efficiency. AI is beginning to intersect directly with its core advertising business, which still accounts for the majority of revenue and profits. As generative AI tools become more capable, there is a growing question about how users interact with the internet — and whether traditional search, the backbone of Google’s ad machine, could be disrupted.

That concern appeared explicitly in Alphabet’s risk disclosures for the first time. The company acknowledged that consumers may reduce their use of conventional search as AI assistants answer questions directly, potentially altering traffic patterns and advertising formats. Alphabet said it is adapting with new ad products and strategies, but cautioned there is no guarantee these efforts will succeed.

So far, financial performance suggests resilience. Advertising revenue rose 13.5% year on year in the fourth quarter to $82.28 billion, easing fears that AI is already eroding demand. But investors are looking beyond current results to the medium-term implications of a shift in user behavior that could be structural rather than cyclical.

At the center of Alphabet’s AI push is Gemini, its flagship model and assistant, which now boasts more than 750 million monthly active users, up sharply from the previous quarter. The rapid uptake underscores why the company feels compelled to invest at scale: falling behind rivals such as OpenAI or Anthropic would risk ceding influence over the next generation of computing interfaces.

Yet scale cuts both ways. The more capital Alphabet commits upfront, the greater the risk of overcapacity if monetization lags, competition intensifies, or technological change renders today’s infrastructure less valuable. The company’s own warning about “excess capacity” reflects a growing recognition that the AI arms race may not deliver returns evenly or immediately.

Alphabet’s decision to lean more heavily on debt also reflects a subtle recalibration of financial strategy. Borrowing allows the company to preserve cash for flexibility, smooth out investment cycles, and take advantage of still-favorable credit markets. But it also ties Alphabet more closely to investor sentiment and interest-rate dynamics, at a time when capital markets are increasingly sensitive to execution risk.

In that sense, the bond sale is symbolic. It shows how AI has pushed Big Tech into territory once associated with capital-intensive industries such as energy or telecommunications, where long-dated assets, fixed costs, and leverage are part of the business model.

Currently, Alphabet retains enormous advantages: scale, data, engineering talent, and a balance sheet that remains strong by almost any measure. But its latest filings and financing plans suggest a more candid tone about the challenges ahead. The AI boom may still be in its early innings, but Alphabet is already grappling with the reality that building the future of computing is expensive, complex, and fraught with trade-offs that even Google cannot fully control.