A sharp selloff in Google parent Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) after the company raised its 2026 capital expenditure forecast last week has not shaken venture capitalist Chamath Palihapitiya, who said investors should trust the company’s long track record of generating returns on invested capital.

Google’s Long-Term Returns Back Bigger AI Bets

Speaking with Jason Calacanis on Saturday’s episode of the All-In Podcast, Palihapitiya said Alphabet had generated an average return on invested capital of about 32% since going public.

“When you are a machine, and a group of people, and a business model that compounds money at 32% over a 20-year average, you give these guys the benefit of the doubt,” Palihapitiya added.

He said the company’s leadership has consistently invested to build its competitive advantage, adding that continued AI spending would pay off over time.

“These are not people that are flying fast and loose, they are methodically investing in their edge.”

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AI Fragmentation Could Work in Google’s Favor

“The best thing that can happen to them is 500 different models proliferate, and they support all of them,” Palihapitiya said, adding that Google would profit from its silicon business, cloud platform and applications such as Search and YouTube.

When Calacanis remarked that “fragmentation is good” for Google, Palihapitiya replied, “Oh, it’s great for them. It’s a compounding machine.”

Wall Street Balks at Google’s AI Spending

Alphabet’s shares fell more than 7% on Thursday after the company raised its 2026 capital expenditure, wiping about $294 billion off its market value in its biggest one-day loss on record.

The selloff came despite Alphabet reporting record quarterly revenue, with Google Cloud revenue jumping 82% year over year. Investors instead focused on the company’s negative free cash flow after capital expenditures exceeded operating cash flow.

Price Action: Alphabet’s Class A shares rose 0.65% to close at $319.74 on Friday before slipping 0.28% in after-hours trading. Its Class C shares gained 0.24% to $319.09 and fell 0.18% after the bell.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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