**Analysis:** This is a financial analysis/news piece about Alphabet (Google) potentially cutting AI CapEx. The user explicitly asked in the last message to output a "**纯json字符串**" (pure JSON string), not HTML. However, the system prompt is very strict about returning the translated HTML content. Given the user's explicit final instruction overriding the system prompt template, I must follow the user's last instruction: **Output a pure JSON string.** **User Input (to be stored in originalText):** `「小作文」再引恐慌： 谷歌或成首家削减AI支出的巨头？

Original Title: AI Bubble Burst: Alphabet Could Be The First To Cut AI Capex

Original Author: Damir Tokic, Seeking Alpha

Original Translation Compiled by: Sulige

Editor's Note: Damir Tokic, a columnist for the U.S. investment platform Seeking Alpha, a finance professor, and a CTA (Commodity Trading Advisor), published a forward-looking analysis of Alphabet's earnings report this Monday, sparking widespread discussion in the U.S. stock investment community. The article suggests that Alphabet, Google's parent company, could be the first among big tech firms to cut AI capital expenditure. Notably, Alphabet will hold its Q2 2026 earnings conference call on July 23 at 4:30 AM Beijing time.

Driven by the fermentation of this view and market sentiment, discussions around AI capex and the "AI bubble" have heated up again. Multiple AI semiconductor concept stocks, including SK Hynix, turned from gains to losses during intraday trading today. The following is the content of the original article:

Alphabet Reports Earnings First

Alphabet (GOOG) (GOOGL) will be the first to report earnings, with the core market focus being its AI capex guidance. In April this year, Alphabet raised its 2026 AI guidance and signaled that AI capex would increase significantly in 2027.

However, the market is increasingly concerned that AI capex is unsustainable on multiple levels, and hyperscalers may be forced to slow down or even cut AI capex for the remainder of 2026 and into 2027. Given that Alphabet will be the first to report Q2 results, it could be the first hyperscaler to lower its AI capex expectations, with others—Meta (META), Microsoft (MSFT), Amazon (AMZN), and Oracle (ORCL)—likely to follow.

In fact, the recent weakness in AI capex beneficiary stocks—such as the semiconductor sector (SMH)—reflects the market's anxiety over AI spending.

As discussed below, Alphabet is particularly vulnerable due to issues with its adjusted free cash flow and the need to issue debt and new equity to finance its AI capex.

Even a hint from Alphabet of slowing down its AI capex guidance could accelerate the bursting of the AI bubble—making this a significant macro signal as well.

The Big Picture

First, consider the big picture. The U.S. economy, especially the stock market, is currently heavily reliant on AI capex. Estimates suggest AI capex will be around $700 billion to $800 billion in 2026 and well over $1 trillion in 2027, primarily focused on data center infrastructure.

However, due to multiple constraints, this projected AI capex is difficult to materialize fully.

· Tokenomics and Return on Investment (ROI): The most critical constraint is the uncertain ROI from AI capex, which is likely far below the cost of capital—implying it could be wasteful spending. Specifically, U.S. data centers are designed for expensive frontier models, while enterprises adopting AI demand cheap open-source models. There is a mismatch. Due to the model substitution effect (from expensive to cheap), token prices are continuously declining, compressing hyperscalers' profit margins per token and making the entire project financially unsustainable. China's new open-source model, Kimi K3, demonstrates that powerful LLMs can be built at minimal cost—suggesting much of this AI capex is unnecessary.

· Energy and Water Constraints: Data centers require massive amounts of electricity for power and water for cooling. These are tangible physical constraints limiting further expansion of data center infrastructure.

· Regulation and Backlash: New York State pioneered a one-year moratorium on data center construction, and several other states are considering similar measures. In the U.S., it appears "red states" like Texas allow data center construction, while "blue states" like New York oppose it. Thus, the AI infrastructure issue has become politicized. Even in Texas, consumer backlash against data centers is growing, potentially posing a challenge for Republicans in upcoming elections.

Therefore, AI infrastructure faces real financial, physical, and political constraints, making it difficult to see how current AI capex guidance can be sustained.

As noted, even signs of a slowdown in AI capex could accelerate the bursting of the AI bubble.

Alphabet's Situation

The market narrative around Alphabet has been:

· "The risk of under-investing is greater than the risk of over-investing" — This implies Alphabet is aware of the possibility of overinvestment but is willing to continue AI capex for competitive and strategic reasons.

· "Demand for compute power exceeds supply" — This suggests Alphabet does not yet see overcapacity and has explicitly stated that if it builds more capacity, revenue would be higher.

Thus, there has been no indication that Alphabet would slow down or cut its AI capex guidance.

However, problems are emerging on the financing side of AI capex—these are real financing constraints.

Specifically, Alphabet appears to have significant issues with free cash flow; consequently, it has been forced to sustain AI capex through debt issuance (over $30 billion in bonds in Q1) and equity financing (announced over $80 billion in new share issuance)—and even halted share buybacks in Q1.

In fact, Alphabet's free cash flow problem might be worse than reported. The Wall Street Journal, in an article titled "How Big Tech's Financial Data Hides the True Cost of AI Buildout," citing columnist Jonathan from "Heard on the Street" and Purdue Professor Kevin Koharki, pointed out that after adjusting for economic costs like stock-based compensation, Alphabet's free cash flow for 2025 could be 67% lower than reported, and 62% lower in Q1 2026. This means the reported $73 billion in free cash flow for 2025 could fall to $24 billion, and the reported $10 billion in FCF for Q1 2026 could drop to around $4 billion.

The key implication is that Alphabet cannot continue its AI capex without borrowing and issuing new shares—increasing debt exposes it to credit issues (especially with low ROI), while new share issuance dilutes existing shareholders.

Now, with Q2 earnings approaching, Alphabet must update its AI capex guidance—creating a tricky situation for investors.

· If Alphabet raises its AI capex guidance despite facing financial constraints (tokenomics, ROI), physical constraints (energy, water, backlash), and financing constraints (FCF, debt, equity), investors will question management's motives and prudence—the stock price is likely to fall.

· If Alphabet cuts its AI capex guidance, it will be interpreted as a macro signal, likely accelerating the bursting of the AI bubble, particularly harming AI capex beneficiary stocks like SMH.

· Even if Alphabet merely reiterates its 2026 guidance and cautiously signals a strong bias for 2027 AI capex, it could be interpreted as a slowdown in AI capex growth, producing the same macro effect as a cut.

Thus, this is truly a dilemma for Alphabet and the broader market. Investors are unlikely to reward increased capex, while a cut would likely penalize AI capex beneficiary sectors.

Judging by the recent performance of the semiconductor sector, investors already seem to be preparing for a slowdown or cut in AI capex.

Alphabet's Financial Condition

Approximately 80% of Alphabet's revenue comes from its Services business (advertising-driven), primarily Google Search, and about 20% comes from Google Cloud.

Alphabet Q1 Earnings Report

Alphabet CEO Sundar Pichai said after the Q1 results:

An excellent start to 2026. Our AI investments and full-stack strategy are activating all aspects of the business. Search had a strong quarter, with AI experiences driving usage growth, queries reaching all-time highs, and revenue growing 19%. Google Cloud revenue grew 63%, with backlog nearly doubling quarter-over-quarter to over $460 billion. Driven by the Gemini app, this was our strongest quarter ever for our consumer AI business. Total paid subscriptions reached 350 million, led by YouTube and Google One. Gemini Enterprise momentum is strong, with paid monthly active users growing 40% quarter-over-quarter. Finally, I'm pleased to see Waymo completing over 500,000 fully autonomous rides per week. These great results build on our differentiated full-stack strategy. Our proprietary models, like Gemini, now process over 16 billion tokens per minute through direct customer API calls, up 60% quarter-over-quarter. It's very encouraging to see our AI investments creating value for users, customers, and the business.

Thus, Google Search grew about 19%, overall margins improved from 34% to 36%, and AI Overviews have not yet eroded advertising revenue.

Google Cloud grew 63%, with compute demand remaining strong—this is Alphabet's primary growth driver. Additionally, Gemini API usage grew, with token usage up 60%, so the model substitution effect has not yet materialized.

These are positive signals, and there's nothing in the financial data pointing to a downgrade—in fact, Alphabet is seen as an AI winner, even Berkshire Hathaway invested in it.

However, problems are gradually appearing in the cash flow statement, even without adjusting free cash flow. With declining free cash flow, Alphabet cannot achieve its guided AI capex without taking on significant credit risk or diluting existing shareholders.

Alphabet Q1 Earnings Report

Implications and Insights

Alphabet reported strong Q1 financials. The only red flag was the decline in free cash flow—especially the adjusted decline—which is a significant warning sufficient to downgrade GOOG to a "Sell" rating.

Without new debt and equity issuance, Alphabet cannot meet its AI capex guidance, which not only increases credit risk and dilutes shareholder equity but also reduces buybacks. Against the backdrop discussed above, this is negative.

If Alphabet cuts or slows its AI capex guidance, investors will have to lower growth expectations, implying multiple compression—again, negative. Note that GOOG trades at a GAAP P/E of 26x, which isn't particularly expensive. However, given concerns about inflated overall earnings, the actual P/E might be much higher.

Please note, this is also a macro call—as the AI bubble burst accelerates, the S&P 500 (SPY) (SP500) and Nasdaq 100 (QQQ) could face a deep correction, and Alphabet could be the first hyperscaler to cut its AI capex guidance.

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