This "Magnificent Seven" Trillion-Dollar AI Stock Is Up 121% in 1 Year: It Still Faces 1 Huge Risk.
Alphabet, valued at $4.2 trillion, has seen its stock rise 121% in the past year, but faces a huge risk due to its massive spending on AI infrastructure. The company's capital expenditure is expected to reach $175-185 billion by 2026, potentially impacting its free cash flow.
Alphabet, a technology giant, has seen its stock surge 121% in the past year, driven by its significant investment in artificial intelligence (AI). The company's valuation stands at $4.2 trillion. Alphabet plans to spend $175-185 billion on capital expenditure by 2026, roughly double its $91 billion expenditure last year. This spending is primarily focused on expanding its technical infrastructure, with 60% allocated to servers and 40% to data centers and networking equipment. The rapid evolution of AI technology raises concerns about the useful life of the assets acquired through this spending. If AI innovation renders hardware and software obsolete quickly, it could lead to a never-ending need for replacement and upgrades. Investors are concerned that Alphabet may not earn an adequate return on its investment, potentially negatively impacting shareholders. The company's free cash flow is expected to decline 70% year-over-year in 2026.
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