Google parent Alphabet joins $2 trillion club as results show power of AI

Alphabet Inc. closed decisively above the $2 trillion market capitalization for the first time on Friday, as a powerhouse earnings report reassured investors that Google will be a major player in native artificial intelligence.
The stock rose 10% to $171.95, its biggest one-day jump since July 2015, resulting in a valuation of $2.15 trillion. The advance increased the company’s market capitalization by nearly $200 billion, becoming one of the largest single-day value additions in stock market history. Shares have gained 23% this year, compared with a 5.3% gain for the Nasdaq 100 index.

The $2 trillion milestone came after the company’s results, where revenue beat expectations on the strength of its cloud-computing unit. Growth in AI boosted cloud demand, while Alphabet also pleased investors by introducing a dividend and announcing a $70 billion buyback program.

Wayne Kaufman said, “Alphabet is very well managed, its free cash flow is absolutely amazing, and it has a huge R&D budget, so no one knows which company will have the best AI products, It’s hard to bet on it.” Chief Market Analyst at Phoenix Financial Services.

While the stock breached the $2 trillion level on an intraday basis in 2021, and again earlier this month, this is the first time that Alphabet has closed above it. Doing so puts it in rarefied territory — only Apple Inc., Microsoft Corp., Saudi Aramco and Nvidia Corp. have crossed the threshold. Nvidia – driven by huge demand for its AI chips – surpassed $2 trillion earlier this year, while Amazon.com Inc. Not far off is $2 trillion.

The road to $2 trillion has been somewhat rocky. The stock has been volatile amid some high-profile criticism regarding the company’s AI offerings, and prior to the latest report, some investors were skeptical of its ability to compete with firms like OpenAI in this important area, despite spending heavily in the field over the years. Capacity was questioned.

Wall Street remains broadly positive on the stock, as about 85% of analysts tracked by Bloomberg recommend a buy. Both earnings and revenue are expected to grow at a double-digit pace every year until 2026.

Furthermore, the stock is looking like somewhat of a bargain. Shares trade around 23.5 times estimated earnings, making it one of the cheapest of the so-called Magnificent Seven. The stock also trades at a discount to the Nasdaq 100, and is only marginally above its 10-year average multiple.

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