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Alphabet Faces Investor Scrutiny Over AI Spending Amid Slowing Cloud Growth

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Alphabet is set to report earnings on Tuesday, with investors closely watching its substantial AI investments as revenue growth slows due to weaker advertising and cloud performance. The Google parent’s capital expenditure for 2024 is estimated at $50 billion, with further increases expected in 2025 to support cloud expansion and AI-driven search enhancements.

The rise of low-cost AI models, such as those from Chinese startup DeepSeek, has intensified concerns over a potential AI price war. Alphabet, like Microsoft and Meta, is defending its high AI spending, arguing it is necessary to maintain a competitive edge.

Google Cloud, a key growth driver, is anticipated to show a slowdown in the fourth quarter. The segment is expected to report a 32% revenue increase, compared to 35% in the previous quarter. This performance will be scrutinized following Microsoft’s recent results, where Azure’s core cloud services underperformed despite AI-driven gains. Analysts are keen to see whether Google experiences a similar trend.

Alphabet’s Search and Other revenue is projected to have grown 11.2% in Q4, slightly lower than the 12.2% increase in Q3. The company continues to face rising competition from Amazon and TikTok in the digital ad space. However, higher political ad spending linked to the upcoming U.S. Presidential elections may have provided a temporary boost.

Overall, Alphabet’s revenue is estimated to have grown 11.9% year-over-year to $96.6 billion, reflecting a slowdown from the previous quarter. Despite a 7% rise in its stock price this year, concerns about a potential deceleration in its cloud segment have mounted, especially after Microsoft’s disappointing cloud results.

Investors will be closely watching Alphabet’s ability to balance AI investments with profitability, as well as its strategy to maintain leadership in both the search and cloud computing markets.

 

Google Integrates SandboxAQ’s Quantitative AI Models into Cloud Services

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Google Cloud has expanded its offerings by integrating SandboxAQ’s large quantitative models (LQMs), designed to process complex numerical data and perform advanced statistical analysis. This move highlights the growing interest of cloud providers in AI technology as a key driver of future growth.

Key Points:

  • Partnership with SandboxAQ: Quantum startup SandboxAQ has announced that its LQMs will be available on Google Cloud, making it easier for businesses to use and deploy these models. SandboxAQ, a spin-off of Google-parent Alphabet, is seeking to expand its reach and customer base through this collaboration.
  • Capabilities of LQMs: The models are designed to handle large-scale datasets and perform intricate calculations, ideal for creating advanced financial models, automating trading strategies, and addressing complex business problems. These models are particularly useful in industries like life sciences, financial services, and navigation.
  • Quantum AI Synergy: According to SandboxAQ CEO Jack Hidary, quantitative AI is essential for many sectors of the economy, especially where mathematical and quantitative relationships are fundamental. He emphasized the complementary nature of quantitative AI and language models in solving complex challenges.
  • SandboxAQ’s Growth: In the previous month, SandboxAQ raised $300 million in funding, which boosted its valuation to $5.6 billion. The company is backed by prominent investors including Fred Alger Management, T. Rowe Price, and Breyer Capital.
  • Broader Industry Impacts: Google’s push into quantum computing, including progress on new quantum chips, is seen as part of its broader strategy to lead in this emerging field. Competitors such as Microsoft and Nvidia have also been active in exploring quantum computing, although practical applications are still seen as years away.

Dexcom Introduces AI-Powered Reports for Stelo Glucose Monitor, Offering Personalized Insights

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Dexcom has launched a new artificial intelligence feature for its Stelo continuous glucose monitor (CGM), giving users a more personalized view of how their meals, sleep, and activities affect their glucose levels. This AI-driven addition, which debuted on Tuesday, is part of Dexcom’s broader efforts to enhance user engagement and provide deeper insights into glucose management.

Stelo, an over-the-counter CGM that monitors real-time blood sugar levels by inserting a small sensor under the skin, was first introduced in August. Unlike traditional CGMs, Stelo is designed for adults who do not take insulin, opening up a new consumer market for the company. This latest feature aims to make Stelo more valuable and personalized for everyday users, with Dexcom focusing on enhancing its capabilities for a broader audience.

Jake Leach, Dexcom’s chief operating officer, emphasized that user feedback had driven the company’s decision to integrate more advanced AI features. “The No. 1 feedback we get is users want to see more,” Leach explained in an interview with CNBC. “They’re making an investment and wearing the product, and they want to be able to take the most advantage of all the data that they’re generating.” The new AI-generated reports reflect this need for deeper, actionable insights.

Dexcom is leveraging Google Cloud’s Vertex AI platform and its Gemini models to build the new AI features. These tools enable developers to synthesize diverse data types, a complex task in healthcare. The company is proceeding cautiously, ensuring the AI platform adds value without compromising the reliability of its core CGM products, which are essential for managing serious health conditions.

While Stelo users have always had access to weekly insights reports, these reports were traditionally formatted in a standard template. The new AI-powered version promises to offer a more personalized experience, drawing on individual user data to provide tailored feedback. For example, if a user’s activity level is low after meals, the report will include specific recommendations to help improve glucose management.

It is important to note that while the AI feature offers personalized insights, it does not provide medical advice. Dexcom has developed the feature with guidance from the U.S. Food and Drug Administration’s (FDA) AI framework. The FDA approved Stelo for use in March, and the company is now looking at expanding the use of generative AI across its other CGM products.

Looking forward, Dexcom plans to evolve its AI capabilities to provide real-time feedback rather than just weekly summaries. The company also envisions using the AI platform to predict potential issues before they arise, much like a “check engine light” in a car, providing early warnings and suggestions for further consultation with healthcare providers.

Chris Sakalosky, vice president of strategic industries at Google Cloud, noted the potential for the technology to offer predictive insights. “It gives you a sense for what could be going on, and recommendations of where you might want to go to seek more advice,” Sakalosky said.

The updated AI-powered reports are already rolling out to Stelo users this week, marking an important step in Dexcom’s mission to make glucose monitoring more intuitive and informative for consumers.