It is scalable but not infinitely, there are some limits.
There are a finite number of people who want what you sell, can afford what you sell and are in an area you can reach. Some portion of those people will use Google. That number is the upper limit of AdWords scaleability.
If you run a local business like a plumber or electrician that number will be small. If you sell something online the number might be much bigger. Either way, there is a hard limit to it.
There is another practical limit. That’s the cost per sale. Assume for the moment that you’re not lucky enough to have a trust fund or trough of venture capital to spend. Your business has to pay the cost of acquiring a customer out of the profit they make from selling to customers. As you scale AdWords up the cost of acquiring the next customer goes up.
An example might help.
Lets assume for the moment that you’ve got some high converting keywords and the cost per acquisition is $50 per sale. You can start scaling your campaign by adding money till your ads are getting shown for as many of those high converting keywords as possible. After that there is no way to scale on those keywords so you have to go and find some more.
The next lot of keywords you find might not be as good at converting so the cost per sale will go up. As long as the cost per sale is less than the profit you make from that sale you can throw money at those new keywords till they too are working at full capacity. Eventually you won’t be able to find any more keywords that generate sales at a profitable cost. That’s the limit.