Alphabet finds itself at a point where the combination of its historically strong business and aggressive investments in artificial intelligence and infrastructure creates an unusual mix of certainty and risk for investors. On the one hand, the company has solid fundamentals in advertising and the cloud, which generate huge free cash flow. But on the other, it is sharply increasing capital expenditure, the return on which remains uncertain. It is this balance between long-term vision and short-term margin pressure that determines how Alphabet will be perceived in the capital markets today.

Alphabet had a record year in 2024, with revenues of $350 billion, up nearly 14% year-on-year, and net income jumping by more than a third to $100 billion. Operating income rose 33%, an unprecedented feat for a company with a market capitalization of three trillion dollars. On the other hand, however, investors are watching rising capital expenditures.

The company has sharply increased its investment…