as letter As it returns to debt markets to fund its AI buildout, the company acknowledges new risks associated with the rise of AI and its huge investments in infrastructure.

in its annual financial report Late last week, Google’s parent company highlighted the potential impact of artificial intelligence on the company’s core advertising business, and how its expensive commitment could ultimately lead to “overcapacity.”

“To meet computing power needs for artificial intelligence training and inference and traditional cloud computing services, we are entering into significant lease arrangements with third-party operators that may increase costs and operational complexity,” the company said in an SEC filing. Alphabet said large commercial agreements could also increase “our liability and obligations if we, our counterparties or suppliers default on their obligations.”

One of the headline numbers in Alphabet’s earnings report was $185 billionwhich represents a cap on the capital spending the company said it might spend this year, is more than double what it would spend in 2025.

To fund its artificial intelligence ambitions, Alphabet plans to raise $20 billion through the issuance of U.S. dollar bonds, according to people familiar with the matter. The person spoke on condition of anonymity because the details are confidential. The planned sales will be conducted in four tranches and include a 100-year pound bond deal, the people said, adding that the deal was five times oversubscribed.

Bloomberg No. 1 report Regarding the planned debt financing, it was initially expected to reach US$15 billion.

Alphabet hosted $25 billion bond sale November. Its long-term debt quadrupled to $46.5 billion in 2025. Chief Financial Officer Anat Ashkenazi said on an earnings call last week that as the company considers its total investments, “We want to make sure we invest in a financially responsible way and invest appropriately, but in a way that maintains a very healthy financial position for the company.”

When asked on the phone what keeps executives up at night, C.E.O. Sundar Pichai Responding to “computing power,” adding, “Power, land, supply chain constraints, how do you ramp up to meet this extraordinary demand right now?”

In total, the alphabet, Microsoft, Yuan and Amazon now is expected Capital spending this year will be more than 60% higher than the historical level reached in 2025, as they load up on high-priced chips, build new facilities and buy network technology to connect it all.

The core of Google’s artificial intelligence strategy is Gemini, whose large-scale language model and artificial intelligence assistant will compete head-to-head with OpenAI’s products and Anthropic’s Claude.

Pichai said on the earnings call that the Gemini AI application currently has more than 750 million monthly active users, up from 650 million monthly active users in the previous quarter.

As more consumers adopt generative artificial intelligence, Google must face the possibility that people will use less Internet search, which means the company’s dominant advertising business may change. This is another thing that Google has included in the risk section of its financial reports for the first time.

“We and our competitors are continually adjusting to this shift and offering new and evolving ad formats,” the filing said. “There can be no assurance that we will be able to effectively and competitively adapt to this shift and that such ad formats, strategies and products will be successful.”

So far, Google has been able to quell concerns that artificial intelligence will cannibalize its search and advertising businesses. advertising revenue In the fourth quarter, it grew 13.5% year-on-year to $82.28 billion.

—CNBC’s Seema Mody contributed to this report.

watch: Clearly, Google is getting a very good return on its capital expenditures