Google’s Nvidia chip challenge boosts cloud sales, crimps cash flow

Alphabet is making billions of dollars selling homegrown AI chips it once reserved for internal use, but building inventory to meet surging demand is draining cash as the tech giant spends heavily on data centres.

Unlike its traditional search and cloud businesses, selling AI chips that compete with Nvidia’s requires Alphabet to spend on hardware well before customers pay, putting pressure on cash flow.

The trade-off, outlined by finance chief Anat Ashkenazi on Alphabet’s post-earnings call on Wednesday, offers an early look at the costs of a business that has emerged as one of the company’s biggest growth areas as investors fret over AI’s threat to its lucrative search advertising business.