Alphabet (GOOG, GOOGL) had been the best-performing "Magnificent Seven" stock of the year coming into its second quarter earnings release amid optimism that the tech giant was moving faster than most in monetizing AI initiatives.
But that dynamic may be poised to change.
Quick insight: Alphabet shares closed below the key 100-day moving average for the first time since April on Wednesday, according to Yahoo Finance AlphaSpace data. The stock fell nearly 5% in premarket trading on Thursday as investors were spooked by Alphabet's capex spending trends.
The downward move could put a test of the 200-day moving average at around $323 in play.
Alphabet's second quarter capex came in at $44.9 billion, slightly above Wall Street forecasts of $44.7 billion. Full-year capex guidance was raised to $195 billion to $205 billion from $180 billion to $190 billion, with a "significant" increase seen for 2027, executives said on the earnings call.
Google's Q2, at a glance: Concerns on AI spending overshadowed a strong quarter for the company. The standout was Google Cloud, where revenue surged an eye-popping 82% to $24.8 billion, while the company's cloud backlog ballooned to $514 billion, underscoring the enormous demand for AI infrastructure.
CEO Sundar Pichai highlighted strong momentum across AI products, including AI-powered Search, YouTube, and Gemini, as the company continues to scale its AI ecosystem.
"We continue to believe that Alphabet is the most well positioned of its peers to monetize its massive AI investment across all its properties by leveraging its proprietary TPU/Axion stack (and its major cost advantages over players such as Microsoft), its dominant distribution position, and its solid AI to take market share, cementing Gemini as the dominant AI platform on 4 billion plus handsets," Pivotal Research CEO and tech analyst Jeffrey Wlodarczak wrote in a note.
The bottom line: With capex spending plans by the hyperscalers getting intense scrutiny by investors, it's reasonable to expect Alphabet's stock to test the 200-day moving average.
Brian Sozzi* is Yahoo Finance's Executive Editor, host of the 'Power Players With Brian Sozzi' podcast and a member of Yahoo Finance's editorial leadership team. Follow Sozzi on X** @BrianSozzi**,** Instagram**, and** LinkedIn**. Tips on stories? Email brian.sozzi@yahoofinance.com.*
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