BUZZ-Street View: Alphabet's AI spending to squeeze margins

Alphabet GOOGL.O said on Tuesday it will spend $75 billion on its AI build-out this year, 29% more than Wall Street expected, and investors signaled disappointment at a missed cloud revenue target and began showing impatience over profitability

Shares down 7.3% to $191.4 in premarket trading

SAILING THROUGH GREY CLOUDS

Citigroup ("buy," PT: $229) says increased capital expenditures will impact free cash flow and earnings, however, with Search AI Overviews live in many countries, they expect sustained Search growth

Morningstar (fair value: $237) believes GOOGL's operating margins will remain flat over the next five years as costs from AI investments rise

D.A.Davidson ("neutral," PT: $200) sees more pressure on margins due to cloud infrastructure expansion

RBC ("outperform," PT: $235) says that while the impact of AI on GOOGL will be widely debated, co is actively advancing its AI efforts and, this proactive approach aligns with broader industry trends