Alphabet, Google’s parent company, is demonstrating renewed confidence in its artificial intelligence capabilities, a shift from last year when it was perceived as falling behind competitors. This change in perception is reflected in Wall Street’s current view of the company as an AI leader.
Google’s AI Investments Yield Results
Executives at Alphabet struck a more optimistic tone during Wednesday’s earnings call, the first since the release of the Gemini 3 model. The Gemini 3 model has been well-received by users and is credited with helping Google regain ground in the AI race.
Alphabet emphasized that its AI investments are now contributing to revenue growth across the entire company, justifying a potential doubling of capital expenditures to between $175 billion and $185 billion in 2026 to support AI computing capacity.
CEO Sundar Pichai stated, “Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board.”
Gemini App Gains Traction
The Google Gemini app, a competitor to OpenAI’s ChatGPT, has seen its monthly active users increase from 650 million to over 750 million at the end of the December quarter. While still trailing ChatGPT, which had over 800 million weekly active users as of October, Google reports higher user engagement since the launch of Gemini 3.
Gemini 3 is now integrated into Google’s search engine through “AI Mode” and powers the enterprise version of Gemini, which has reached 8 million paying licenses.
Shifting Investor Sentiment
While Google’s cloud revenue increased by 48% in the December quarter, investor sentiment has also shifted away from companies heavily reliant on OpenAI. Microsoft’s shares experienced a significant decline last week, partially due to concerns about its dependence on OpenAI, and the company announced a decrease in fiscal third-quarter spending from a record $37.5 billion.
Shares of Oracle, with a contract backlog exceeding $500 billion largely tied to OpenAI, have fallen approximately 49% since October. Microsoft, holding a 27% stake in OpenAI, has decreased by over 20% during the same period. In contrast, Alphabet’s stock has risen by about 36%.
According to Paul Meeks of Freedom Capital Markets, “I do think there’s a narrative emerging here where the market is favouring Google versus OpenAI.”
Frequently Asked Questions
What is driving the change in Wall Street’s perception of Alphabet?
Wall Street’s perception has shifted due to Alphabet’s demonstrated ability to generate revenue growth across its businesses as a result of its AI investments, particularly with the release of the Gemini 3 model.
How does the Google Gemini app compare to OpenAI’s ChatGPT in terms of user base?
The Google Gemini app exceeded 750 million monthly active users at the end of the December quarter, while OpenAI’s ChatGPT had over 800 million weekly active users as of October.
What is Alphabet’s projected capital expenditure for 2026?
Alphabet is considering potentially doubling its capital expenditures in 2026 to between $175 billion and $185 billion, driven by investments in AI computing capacity.
Given the current market trends, how might investor priorities shape the future direction of AI development and investment?
