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The AI arms race has been rolling since ChatGPT landed in late 2022, and one quote from that era keeps coming back to me as I look at where Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction) and Microsoft (NASDAQ:MSFT) stand today.
When author Sebastian Malaby visited DeepMind CEO Demis Hassabis at the end of April 2023, Hassabis said: “This is wartime. OpenAI and Microsoft have literally parked the tanks on the lawn.”
Google had been caught flat-footed, and Hassabis knew it. When OpenAI launched ChatGPT in November 2022, internal bets on user adoption ranged from a few thousand to tens of thousands. They prepared server capacity for 100,000 users. Within 5 days it reached 1 million users. Within 2 months it hit 100 million users, making it the fastest growing consumer application ever.
His response was immediate. He pivoted DeepMind from peacetime to wartime operations: pared back blue sky research, stopped publishing mission-critical research that competitors could copy, and shifted focus from pure science to engineering. Google then merged Google Brain and DeepMind, consolidating its AI efforts behind a single product called Gemini.
A DeepMind researcher said: “My view is that we probably needed to be second for a while just to light a fire under our own ass. There’s nothing like public humiliation for galvanizing action.”
What Wartime Looks Like in the Financials
The wartime posture is visible in the numbers. Google’s 2026 CapEx guidance is $175 to $185 billion, up from $91.45 billion in FY2025. That’s a company betting the balance sheet on AI.
The returns are arriving. Google Cloud posted $17.66 billion in Q4 2025 revenue, up 48% year over year, with operating income more than doubling. The Gemini App reached 750 million monthly active users in Q4 2025, up from 650 million in Q3 2025. GOOGL shares are up 120% over the past year.
Microsoft’s wartime posture runs through its OpenAI partnership. Microsoft holds roughly a 27% stake in OpenAI valued at approximately $135 billion, with OpenAI contracted for an incremental $250 billion in Azure services and IP rights extended through 2032. Azure grew 39% year over year in Q2 FY2026, and Microsoft’s commercial remaining performance obligation surged 110% year over year to $625 billion. MSFT shares are up 6% over the past year, though they’re down 22% as valuation compression weighs on the stock.
The deeper question for long-term investors is one Hassabis himself raised: whether competitors are building AGI for scientific reasons or to accumulate power. Steve Jobs made the same observation: “The older I get, the more I’m convinced that motives make so much difference.” For retirement-horizon investors, the distinction between a company building generational products versus one building to win a news cycle is the kind of signal worth tracking across both names.
Hassabis called it wartime in 2023. The capital commitments from both Google and Microsoft confirm the war is still on, and the financials suggest both are fighting to win it.
