Alphabet shifts to owning AI infrastructure, boosting cloud growth but facing margin risks.

Alphabet is evolving from benefiting from AI to owning AI infrastructure, particularly through its TPU strategy, which improves control over scaling costs. Its cloud revenue grew 63% year-over-year with a $460 billion backlog, indicating strong demand but potential risks if backlog conversion slows. The company plans capital expenditures of $180–190 billion, showing a long-term AI infrastructure commitment, though this could pressure margins if revenue growth weakens. Despite these risks, the current valuation reflects confidence in sustained growth and AI monetization potential, supporting a buy rating.