The stock price has more than doubled, raising its market capitalization by more than $2 trillion as investors see increasing strength in its artificial intelligence capabilities. At $4.3 trillion, Alphabet is now the second-most valuable company in the world, up from fifth at this time last year. And in a sign of how significant Google's parent has become to the overall economy, the shares were added to the Dow Jones Industrial Average this week.
But a funny thing is happening on the way to the coronation: Alphabet's stock price is suddenly struggling. The shares lost 6% in June and have been in the red for four of the last five months, including drops of more than 7% in February and March. Of course, the stock's one green month in that stretch was a 34% scorcher in April, which has the stock up 14% for the year. But that's a far cry from its 65% gain in 2025, and it trails the 20% rise in the tech-heavy Nasdaq 100 Index this year.
"This really shows the fickleness of the AI trade, said Alec Young, chief investment strategist at the quant research firm MoneyFlows. "Just a month or two ago Alphabet was the rock star."
The company is still a dominant AI player thanks to the success of its Gemini model and the popularity of its chips. But the stock has been caught in a market rotation away from the biggest AI spenders and toward the chipmakers that are receiving much of that cash. In early June, Alphabet announced plans to raise about $85 billion from equity sales to fund its capital expenditures, which weighed on the stock. And it has seen a series of high-profile departures, with key AI researchers leaving for rivals.
"The market has shifted to companies seeing immediate growth from AI, which is infrastructure and chips, while companies with huge capex are in the penalty box," said Young, who remains enthusiastic about Alphabet's prospects. "Then, if it seems like important people are leaving, you're going to get another hit from that."
Magnificent 7 Struggles
Alphabet is hardly the only AI spender whose stock is having a hard time right now. The Bloomberg Magnificent 7 Index is down 1.7% this year, falling well short of the S&P 500 Index's almost 10% gain. Alphabet is the best performer among the Mag 7 tech behemoths in 2026, while competing AI spenders Microsoft Corp. and Meta Platforms Inc. are at the bottom after putting up double-digit percentage declines.
It's also worth remembering how far Alphabet has come to get here. A year ago, Wall Street feared its Google Search business was at risk of disruption from AI. Now, the company is widely seen as having strong positions in key areas like cloud computing and semiconductors, its Gemini AI model has legions of fans, and its digital-advertising businesses continue to churn out profits. It also is an investor in Anthropic, which has another leading AI model in Claude.
Alphabet's "fundamentals and visibility into '27 and '28 are improving," creating "a tactical buying opportunity for one of the best positioned AI companies around," Morgan Stanley analyst Brian Nowak wrote in a note to clients on June 29, lifting his price target on the stock to $415 from $375. It closed Tuesday at $357.
Still, the competition for AI supremacy is intense, and perceived gains or losses in momentum can have big ramifications across the tech sector. Alphabet is reportedly reorganizing its recently launched AI coding strike team to try to catch up with Anthropic, which confidentially filed for an initial public offering in early June.
The race is expensive, given the cost of building out data centers and filling them with pricey processing and memory chips. That's why Alphabet upsized its June equity raise from the $80 billion it originally announced.
Alphabet had said it plans to spend as much as $190 billion on capex this year, but the deal suggested it may have grander ambitions. It "points to a further increase in 2027 capex, which we believe could climb around 50% to $300 billion," Bloomberg Intelligence analyst Mandeep Singh wrote in a research note on June 1.
That level of spending would further eat into the company's free cash flow, which is expected to fall to $20.5 billion in 2026 and $14 billion in 2027 from more than $73 billion in 2025.
Eyes on Cash Flow
"You've got just this uncertainty about how much spending is going to take place and then the fact that they're potentially diluting equity shareholders to continue that spending," said Allen Bond, portfolio manager at Jensen Investment Management.
That deterioration of free cash flow helps explain why investors are getting skittish about the stock, particularly as it trades at a relatively lofty valuation. The shares are priced at around 24 times estimated earnings, a premium to their 10-year average of roughly 21 and higher than the other big AI spenders — Meta, Microsoft and Amazon.com Inc.
However, that valuation does comes with an encouraging growth picture. Revenue is expected to expand almost 24% this year, up from last year's 16% pace, according to data compiled by Bloomberg, before decelerating slightly over the next three years. Analysts project that earnings per share will rise 32% this year, and while that's expected to slow to 3.2% in 2027, it's then seen accelerating 18% in 2028 and more than 20% in 2029.
So while Alphabet's equity offering has been weighing on the stock right now, to long-term investors this moment could be seen as a buying opportunity, said David Katz, chief investment officer at Matrix Asset Advisors, which owns Google shares.
"The question is, who are going be the winners and is this money being spent responsibly," Katz said. "We are very comfortable that Google is going to be one of the winners, number one. We are exceptionally comfortable that they're spending their money responsibly."
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