Why Alphabet (GOOG) Stock Is Slumping Today

Alphabet (GOOG,GOOGL) stock is tumbling 7% this morning. The tech giant plans to spend more money on AI development than expected this year, and its cloud business expanded at a slightly lower rate in the fourth quarter than the Street had anticipated.

High Capital Expenditures and a Cloud Revenue Miss

GOOG intends to spend $75 billion on capital projects this year, way above the $57.9 billion that analysts, on average were anticipating. Most of those funds will be used to launch servers and data centers that facilitate AI.

Google

CEO Sundar Pichai said that the company has to keep investing in its cloud business to ensure that the unit can meet the demand for its offerings. Indeed, CFO Anat Ashkenazi stated that Google Cloud did not have enough data centers to satisfy demand in Q4.

The cloud business’ sales did jump 30% last quarter versus the same period a year earlier to $11.96 billion. But analysts’ mean estimate called for the unit’s revenue to climb 32.3% year-over-year to $12.16 billion.

More Information about GOOG

Alphabet generated Q4 earnings per share of $2.15, versus analysts’ average estimate of $2.13. Its revenue rose 11.8% year-over-year to $96.5 billion, slightly below analysts’ mean outlook of $96.67 billion.

In the last month, the shares have fallen 1.4%, but they have risen 8% in the last three months.

While we acknowledge the potential of GOOG, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.