Alphabet Rides The AI Wave Over The $3 Trillion Mark

Tech giant Alphabet joined the $3 trillion club this week, making it the fourth company to reach that impressive market cap. Certainly, you’ve heard about the other three — Apple, Microsoft, and Nvidia — but, if not, just Google them.

A favorable ruling earlier this month in an antitrust case against Alphabet kickstarted the stock’s latest upward swing. A US court ruled the company didn’t need to sell off its Chrome browser or Android operating system, two outcomes investors feared would cut into the company’s core biz. Then there’s what pushed the stock over the top into $3 trillion territory: growing enthusiasm for Alphabet’s AI investments.

AI’m Feeling Lucky

Alphabet’s stock has climbed more than 70% from its April low. Its cloud-computing unit’s revenue surged a better-than-expected 32% in the second quarter, lifted by demand for new AI offerings like the Gemini chatbot from its Google subsidiary. Earlier this month, Google Cloud’s CEO said the company’s already made billions from AI and has $106 billion in customer demand for its cloud computing services.

The success highlights Alphabet’s efforts to diversify beyond its advertising businesses, including at Google and YouTube, which make up more than half of revenue. And, following Google Cloud’s success, Alphabet’s bringing AI to more products:

• On Tuesday, YouTube announced a slew of new AI offerings, mainly aimed at content creators. The tools will allow them to use AI to add backgrounds and special effects to their videos, while podcasters (a growing space for YouTube) can generate videos and highlight reels. Creators can also consult AI for analytics and feedback.
• AI’s also being used to boost monetization. Google Ads will use AI to recommend creators to brands for potential partnerships. Businesses and influencers will be able to tag products in YouTube shopping, its TikTok-like social shopping foray, which led tech site The Verge to muse that the site is becoming more like “a shopping channel.”

Surface Tension: Fears of the AI bubble bursting haven’t been realized, as investors continue to bet that massive investments into the tech will pay off. AI chip-maker Nvidia is still the most valuable company with a market cap of more than $4 trillion. And Oracle signed a $300 billion cloud deal with OpenAI last week, pouring fuel on its stock’s rally. If AI is a bubble, it seems to be made of something more durable than soapy water.