Google hyperscales into first place in race for AI dominance

In a world economy changing at the exponential pace of artificial intelligence, a year is a very long time. Certainly, it’s enough time for Alphabet, parent of Google, to transform its standing from that of likely biggest loser in the race to AI dominance into the leader of the pack.

Most of the big US AI hyperscalers have now reported their first-quarter earnings. All of them beat expectations for revenues and profits. All of them increased how much they are likely to invest in capex this year. The numbers continue to be mind-boggling. Between them, Alphabet, Microsoft, Meta (parent of Facebook) and Amazon now have combined capex commitments for this year of $700bn-$725bn, up from $381bn in 2025. Oracle now has a backlog of orders under contract of $553bn.

It is still hard to tell how much this reflects genuine demand from end users, as opposed to capital swishing around among a small group of big players. Yet investors and market analysts are increasingly shifting their focus away from how much is spent (or promised) to whether and how fast that spending is translating into higher revenues and margins.

Alphabet’s almost $110bn in revenue was roughly 22% higher than a year ago. Notably, the profit margin in its Google Cloud business jumped to nearly 33%, from a little over 9% a year ago – helping the firm’s shares jump to a new all-time high. Microsoft shares fell, however, despite record revenues and earnings, apparently because a large part of its projected increase in capex was due to higher component prices – which, if continued, could limit future profit growth. Meta was also punished by investors for (among other things) reporting more expensive components. A huge question for the next quarter is whether these cost pressures spread to other hyperscalers.

Jamie Dimon is no prophet of doom. But the boss of the giant American bank JP Morgan is clearly growing steadily more nervous about the future, especially regarding credit markets.

In October, Dimon warned correctly of looming problems in private credit markets after one deal blew up, noting that “when you see one cockroach, there’s probably more”. Now his fears extend to government debt. On 28 April he told a conference hosted by Norway’s sovereign wealth fund that “the way it’s going now, there will be some kind of bond crisis”, adding that, because it is so long since the last credit recession, “when we have one, it would be worse than people think. It might be terrible.”

This coincided with the value of US government debt held by the public exceeding the size of its economy, now at 100.2% of GDP, roughly double its historic average. It previously exceeded GDP only in exceptional circumstances just after the second world war. On current trends, it is projected to reach 125% of GDP by 2036. The International Monetary Fund calculates the US national debt burden differently, and higher, at up to 124% of GDP, below Japan (235%) and Italy (137%) but bigger than Britain’s (104%).

A crisis doesn’t yet seem especially close at hand, but who really knows? Unknown linkages between shadow and formal banking systems and hidden or unintended leverage can rapidly turn seemingly contained problems into systemic ones, as they did in 2008, for example.

Dimon tried to offer some reassurance in Norway, claiming, “I’m not that worried we’ll be able to deal with it”, and adding: “I just think maturity should say you should deal with it, as opposed to let it happen.” But how much of that kind of maturity is to be found within today’s increasingly indebted governments?

So far this year there have been no major examples of British companies being hacked – a relief after the cybersecurity disasters of 2025. The biggest case so far is a ransomware attack in April on automotive data analytics firm Autovista, which disrupted its services across Europe and Australia. That pales beside last year’s cyberhorrors at Marks & Spencer and Co-op (hitting revenues by 300m and 206m respectively) and, above all, Jaguar Land Rover (JLR), costing an estimated 1.9bn, and, according to the Bank of England, contributing to the unexpected contraction in Britain’s GDP last autumn.

This year’s relative calm may be a blip, however, as there is little reason to think that further big cyber-attacks will be avoided. The government’s proposed new legislation is still before parliament. Even if it takes effect later this year, as expected, regulation can only do so much. New data released on Thursday from the government’s 2025-26 cybersecurity breaches survey reveals widespread vulnerabilities. About 69% of large firms in Britain suffered a cyberbreach or attack in the past 12 months, and 43% of all firms, including 29% that experienced at least one a week.

UK plc is not uniquely prone to cyber-attacks. The US is the most targeted economy, and cyber-incidents are a significant cost to German business. But British companies, especially larger ones, love to use outsourced helpdesks in far-off places, which are often targeted by hackers. And boards have tended to downplay cybersecurity as more of an IT issue than an enterprise-level risk. Baroness Lloyd, the cybersecurity minister, recently wrote to the chairs and CEOs of 180 leading UK businesses urging them to sign a new Cyber Resilience Pledge. They should do so, and act on it urgently.

Photograph by Cesc Maymo/Getty Images