Google's parent company is becoming an AI leader, surpassing OpenAI - Reuters
Kyiv • UNN
Alphabet strikes a confident tone on its AI investments, which are starting to pay off. The company expects to double capital expenditures by 2026, strengthening its position on Wall Street.
Alphabet is challenging OpenAI with such enthusiasm that it underscores Wall Street's view that Google's parent company is a leader in AI. This is a change from last year, when investors believed the company was far behind its competitors and drove down its stock, Reuters reports, writes UNN.
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Alphabet executives struck a more confident tone on a conference call after releasing financial results on Wednesday, the first since the release of the Gemini 3 model, which impressed users and helped Google catch up with competitors in the artificial intelligence race.
While Alphabet did not mention its main AI competitor, Alphabet's new confident messaging highlighted a key contrast: AI investments have begun to pay off across the company. This served as justification for a potential doubling of capital expenditures in 2026 - to $175-185 billion - due to massive investments in computing power for AI.
In Alphabet's prepared statements on AI in 2025, the main focus was on the use of AI products and revenues generated, particularly through the cloud computing division.
"Overall, we see our investments in AI and infrastructure driving revenue growth and development across all areas," said CEO Sundar Pichai.
Google's new confidence in AI-driven revenue is underpinned by growth in both consumer and enterprise businesses.
Pichai reported that Google's Gemini app, which competes with OpenAI's ChatGPT, exceeded 750 million monthly active users by the end of the December quarter, up from 650 million at the end of the previous period. This is still less than ChatGPT, which, according to OpenAI CEO Sam Altman, exceeded 800 million weekly active users in October.
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"We are also seeing significantly higher user engagement, especially after the launch of Gemini 3," Pichai said.
Gemini 3 is also integrated into Google's search engine's "AI mode" and is used in the enterprise version of Gemini, which Pichai said has reached 8 million paid licenses.
Google's sharp increase in capital expenditures initially worried investors, causing the stock to fall 6% in after-hours trading. However, the strong performance of the cloud division - revenue grew 48% in the December quarter - and the development of AI in other business areas quickly strengthened Wall Street's confidence that Google's AI bets are starting to pay off.
This further reinforced Wall Street's current message to tech companies: rapid growth in AI spending can only continue if tech companies demonstrate a corresponding financial return.
On Thursday, shares fell 2% in pre-market trading. Last year, they rose 65% and started 2026 with an optimistic 6% gain.
Since the beginning of last year, Alphabet has transformed from a laggard to a leader among the "Magnificent Seven" mega-cap companies and is now second only to Nvidia and Apple among companies with a market capitalization of over $4 trillion.
Despite a relatively modest approach to capital expenditures for the year, Microsoft's stock fell sharply last week, partly due to concerns about its reliance on OpenAI. The company said its spending in the third fiscal quarter would decrease from the record $37.5 billion spent between October and December.
With OpenAI having signed a number of multi-billion dollar deals despite losses, investors are concerned about the company's ability to fund these commitments, which is dampening sentiment for the large tech companies with which it is closely associated.
Paul Meeks, head of technology research at Freedom Capital Markets, said Alphabet is benefiting from a shift in sentiment despite a "staggeringly high" capital expenditure forecast.
"I think there's a trend forming here where the market is favoring Google over OpenAI," Meeks said. "At this time last year, every OpenAI partnership announcement with anyone was cheered. But then, at the end of 2025, people are saying, 'My God, too much of my order book or AI infrastructure spending is going to OpenAI.'"
Oracle shares, whose order book of over $500 billion is heavily dependent on OpenAI, have fallen approximately 49% since early October. Microsoft shares, which own 27% of OpenAI and consider it a major client, have fallen more than 20% over the same period.
Meanwhile, Alphabet shares have jumped approximately 36%.
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