Alphabet to Lift AI Capex Above $200 Billion Again Next Year

By Amara Osei

Alphabet is spending roughly $200 billion this year on AI capacity, and President and Chief Investment Officer Ruth Porat says the bill will grow again in 2027. Capex will "increase significantly" next year, she said Monday at Fortune's Most Powerful Women Summit in Santa Barbara, because Google remains "capacity constrained" as demand for compute keeps climbing.

"The demand for compute—because of the value that our partners are seeing in the enterprise, in governments, what we're seeing across our platform—suggests that we're in the buildout here now," Porat told Fortune Editor-in-Chief Alyson Shontell. Asked whether the industry has peaked on AI spending, Porat answered: "We do see this as an opportunity that extends for quite some time."

What does the spending do to Alphabet's finances?

Porat, No. 11 on Fortune's 2026 Most Powerful Women list, is running one of the largest corporate spending sprees ever. She took her current role in 2023 after nearly a decade as Alphabet's finance chief, and before that she was Morgan Stanley's CFO. She now oversees Alphabet's investment vehicles, including capital arms GV and CapitalG, the "Other Bets" ventures, and real estate investments.

Wall Street isn't cheering. In July, Alphabet lifted its 2026 capex outlook to as much as $205 billion — and the stock dropped more than 6% the next day.

The numbers show why investors are nervous:

• Capex hit $44.9 billion in Q2, "with the vast majority of this spent in technical infrastructure to support our investments in AI," CFO Anat Ashkenazi said on the earnings call.
• Free cash flow fell to negative $5.9 billion — Alphabet's first negative quarterly cash flow in more than 20 years as a public company.
• Google Cloud revenue climbed 82% to $24.8 billion, with operating profit more than tripling to $8.8 billion.

Does Google risk capital destruction?

Shontell pressed Porat on a recent report from Jefferies global head of equity strategy Chris Wood, who argued the AI boom will most likely end in massive capital destruction in the U.S. as cheaper open-source Chinese models take market share. Porat rejected the thesis.

"It's illogical to say that we're in a capacity-constrained position because there's such strong demand for the insight and the ability to improve business and government, and yet you can't drive a return on it," she said.

Attractive returns, she said, hinge on two questions: "One, what is the value that we add to partners so that you can actually deliver attractive revenue growth, and the other is how efficiently do we deliver that compute capacity."

Her framing of winning is about endurance, not rankings. "The thing that is true throughout history is anything that is not built for the long run won't endure for the long run," Porat said. She traced today's capex back to Google's 2016 pivot from "mobile first" to "AI first."

"You must invest for long-term growth," she added. "By the time you need it, it's too late."

What about the backlash against data centers?

Porat acknowledged growing local resistance. About 71% of Americans don't want a data center built in their community, in line with a recent Gallup poll. She argued opinion shifts when companies add energy capacity, protect affordability, and create local jobs. She pointed to Google's investments in nuclear, geothermal, solar, and wind, and to a Skilled Trades Alliance Google cofounded with Ford, BlackRock, and Carhartt to train electricians, welders, and other workers the buildout requires.

"We have to solve the downside anxiety. It's real. It's substantive," Porat said. "That's why I say, if we can [build AI], we must."

She draws on crisis-tested experience. During 2008, she led the Morgan Stanley team advising the Treasury Department on Fannie Mae and Freddie Mac, and the New York Fed on AIG, working with then-Treasury Secretary Hank Paulson. The lesson she carried forward: "identify your greatest source of vulnerability early and fortify against it, because you can't address it in the moment."

For companies today, she said, that vulnerability is falling behind on AI. "Because if anyone is connecting with your customers in ways that you are not … You're at a competitive disadvantage." With next year's capex set to rise beyond the current $200 billion pace, Porat has put Alphabet's money on that thesis.