Alphabet is ramping up its AI investment, increasing its spending outlook as Google accelerates efforts to build the infrastructure needed to compete in the global AI race.

The Google parent company hiked its 2026 capital expenditure forecast to between US$195 billion and US$205 billion, up from a previous estimate of US$190 billion. The move signals the company’s race towards major AI expansion, including spending on AI data centres, advanced computing hardware and custom AI chips as demand for enterprise AI services continues to grow.

The increased investment comes as Alphabet reports strong momentum in its cloud business, with Google Cloud revenue growing as organisations adopt AI-powered platforms and services. The company is positioning AI infrastructure as a critical growth engine, competing directly with Microsoft Azure and Amazon Web Services.

Alphabet CEO Sundar Pichai said AI is now contributing across every major part of the company..

The increased funds will go towards expanding computing capacity, including the development of its Tensor Processing Units (TPUs), which are designed to accelerate AI workloads. The level of spending reflects the scale of competition among the biggest tech companies as they race to develop and deploy the next generation of AI systems.

While Alphabet’s cloud division delivered strong growth, the company’s traditional search advertising business revenue was slightly below expectations. The result highlights the challenge facing Google as consumers begin to access differently online, affected by AI-powered search tools.

Alphabet’s decision to increase spending demonstrates the company’s belief that the long-term opportunity in AI will outweigh the significant costs involved in building the required infrastructure. Google, Microsoft, Amazon and other technology giants are committing billions of dollars to AI development.