But shares fell 3% on Wednesday after the company said it would spend up to $185 billion this year, intensifying investor scrutiny as spending may more than double from 2025 and eclipse rivals Microsoft, Meta and Amazon.“We are quickly surpassing the $1 trillion mark in combined investments across mega-caps by 2026 when we consider both capital expenditures and related resource needs,” said Bernstein analyst Mark Shmulik.
“To be able to pay back that trillion suggests that the total addressable market for AI-driven products and improvements will need to be a multiple of that very quickly.”
For now, AI spend is reaping returns, and its shares remain up more than 80% over the past 12 months, even with Thursday’s decline.
Alphabet’s prepared comments on AI in 2025 focused on product usage and AI revenue generated specifically through its cloud computing unit. Cloud unit revenue rose 48% in the December quarter. That’s because Wall Street has sent a clear message to tech companies: rising AI spending can only continue if tech companies demonstrate commensurate financial returns.
“Overall, we see our AI investments and infrastructure driving revenue and growth across the board,” said CEO Sundar Pichai.
Google’s belief in AI-powered revenue is supported by growth in both its consumer and enterprise businesses.
Pichai said the Google Gemini app, which competes with OpenAI’s ChatGPT, had more than 750 million monthly active users at the end of the December quarter, up from 650 million in the previous quarter.
That still trails ChatGPT, which OpenAI CEO Sam Altman said in October had eclipsed 800 million weekly active users.
“We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3,” Pichai said.
Gemini 3 is also integrated into “AI mode” in Google’s search engine and powers Google’s business version of Gemini, which Pichai said had reached 8 million paying licenses.
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Since early last year, Alphabet has gone from laggard to leader among the “Magnificent Seven” megacap companies and is now rivaled only by Nvidia and Apple among companies with a market capitalization of more than $4 trillion.
Despite taking a relatively modest tone on capital spending this year, Microsoft shares took a huge hit last week, partly due to increased concerns about its dependence on OpenAI. The company said spending for the fiscal third quarter would decline from the record $37.5 billion it spent in the October to December period.
As OpenAI has closed a series of multibillion-dollar deals despite still losing money, investors have grown concerned about the company’s ability to fund those obligations, souring sentiment around the big tech companies it has close ties to.
Paul Meeks, head of technology research at Freedom Capital Markets, said Alphabet benefited from a contrast in sentiment despite an investment forecast that was “eye-popping.”
“I think there’s a narrative emerging where the market favors Google versus OpenAI,” Meeks said. “This time last year, any announcement from OpenAI to do business with someone was welcomed. But at the end of 2025, people are now saying, ‘Oh my god, a lot of my revenue backlog or AI infrastructure spend is coming from OpenAI.’”
Shares of Oracle, whose more than $500 billion contract backlog is largely dependent on OpenAI, have fallen about 49% since early October. Microsoft, which has a 27% stake in OpenAI and considers it a huge customer, is down more than 20% over the same period.
Meanwhile, Alphabet is up about 36%.
“The deals OpenAI has with Microsoft and Oracle are strongly tied to their ability to raise future funds,” said Dan Morgan, portfolio manager at Synovus Trust. “I think that’s why you see the street favorite Alphabet.”
Alphabet’s deep war chest is filled with major deals it has made in recent months to power products and infrastructure from tech companies Meta and Apple.
“If you’re software and you’re connected to OpenAI, you’re twice as unintriguing to people. Right now, Google is in the lead,” said Eric Clark, portfolio manager of the LOGO ETF.
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