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Google’s top energy executive is pushing back on fears of an AI infrastructure glut, days after Wall Street punished Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) for its spending.

Amanda Peterson Corio, Google’s global head of energy and power, told The Information last week that the bigger danger lies in building too little.

"I am much more worried about the risk of underbuilding than overbuilding. We have very clear demand from our customers, and we have a variety of customers," she said. "We are fairly confident that everything we are building today and paying for is going to be used and utilized."

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Spending Rattles Wall Street

The comments come at a tough moment for the stock. Alphabet’s Class A shares fell 12.6% last Thursday for their worst day since they began trading more than 20 years ago.  Before Monday’s opening bell, Class A shares traded at $288.43, down 11.2% from Wednesday’s $324.89 close, according to Benzinga Pro data. 

The quarter gave investors plenty to chew on. Diluted earnings per share dropped to $2.12 from $2.87, well below the roughly $3 consensus. 

Capital expenditures totaled $51.36 billion in the third quarter, short of the $55.09 billion analysts expected, CNBC reported. Free cash flow came in at negative $9.07 billion. 

Alphabet did not blink on its spending plans. The company maintained its full-year capex forecast of $195 billion to $205 billion and still expects a significant increase in 2027. 

Debt is rising alongside the buildout. Long-term debt climbed to $125.1 billion, up from $21.6 billion a year earlier. 

The earnings report supports Peterson Corio’s demand argument on the revenue side. Consolidated revenue rose 25% to $127.6 billion. Google Cloud revenue jumped 103% to $30.7 billion, and sales of TPU systems were a meaningful contributor to growth. 

On the earnings call, Alphabet said 35% of its third-quarter technical infrastructure investment went to data centers, which carry useful lives of seven to 40 years. The other 65% went to servers and networking equipment. 

Customers Line Up for Capacity

Capacity is still tight. Because of supply constraints, Google began tapping third-party compute capacity at the end of the third quarter and plans to ramp its use in the fourth quarter, which management expects to pressure margins in the near term. 

Google Cloud CEO Thomas Kurian described the pull from buyers in strong terms. He told analysts the company is seeing "extraordinary demand and strong growth" from AI labs, capital markets, financial services institutions and enterprises. 

Executives also said nearly 100 clients use TPUs and expect to recognize just over 55% of the cloud backlog as revenue over the next 24 months. 

The Bottom Line

Investors want proof the spending pays off before the 2027 ramp begins. Peterson Corio’s remarks signal Google has no plans to tap the brakes.

GOOGL Stock Price Activity: Alphabet shares were up 1.31% at $283.51 at the time of publication Monday, according to Benzinga Pro market data.

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