New York, January 12, 2026, 11:02 EST
- Alphabet briefly soared to a $4 trillion valuation as investors responded to its revamped AI strategy
- Shares edged mostly flat in late morning trading, following a morning rally.
- Attention now turns to Google Cloud’s expansion, early takes on Gemini 3, and efforts to monetize proprietary AI chips
Alphabet surged past a $4 trillion market cap on Monday, highlighting the rapid shift in investor sentiment toward Google’s AI ambitions. Reuters
This shift matters now as Big Tech’s AI spending spree bumps up against a crucial question: who can convert their hardware and models into steady cash flow, and who’s merely leasing pricey compute power from others.
Alphabet shares dipped 0.3% to $327.47 in late morning trading. The stock has climbed roughly 65% over the last year and gained about 6% year-to-date in 2026.
The rally has propelled Alphabet closer to Nvidia, Microsoft, and Apple among the market’s elite, shedding its old image as just a mature ad company and stepping into the AI spotlight.
Alphabet has boosted that re-rating by shifting Google Cloud’s image from an internal expense to a growth driver. Reuters reported a 34% jump in Cloud revenue in Q3, with a backlog of signed but unrecognized sales contracts swelling to $155 billion.
Investors are zeroing in on reviews of Alphabet’s Gemini 3 model. Reuters reported it sparked strong reactions, ramping up the pressure on OpenAI following mixed responses to its recent GPT-5 launch.
Hardware is another key area. Google is starting to rent out its in-house AI chips to external clients, promoting its “Ironwood” TPU series as a more affordable option for running large models—especially during inference, where trained models deliver real-time answers. James Bradbury, head of compute at Anthropic, said in a Google Cloud blog post, “Ironwood’s improvements in both inference performance and training scalability will help us scale efficiently while maintaining the speed and reliability our customers expect.” Google
Some investors push the idea even further, saying Alphabet’s vertical integration could lead to what they call “near-zero marginal cost” AI. That means the expense of handling one extra query drops dramatically once the system is in place. “GOOG’s internal silicon … enable near-zero marginal AI inference costs,” noted Seeking Alpha contributor Esxeleryn Analytics in a Jan. 10 report. Seekingalpha
On the chip front, Reuters cited a report saying Meta is considering a multibillion-dollar purchase of Alphabet’s chips for its data centres beginning in 2027. That move would pit Google head-to-head with Nvidia’s dominant GPU business.
The downside risks haven’t disappeared. AI assistants might drain revenue from search ads, and robotics continues to show that edge cases remain a thorny problem. In Phoenix, a Waymo robotaxi stopped on light rail tracks just as a train approached, forcing the passenger to jump out. “Something unexpected where the machine drove like a machine rather than a person,” said Arizona State University professor Andrew Maynard. Kbtx
At this stage, the market views Monday’s valuation update as signaling that Alphabet’s AI narrative has lost its defensive edge. The upcoming challenges are more straightforward: can Cloud continue turning backlog into actual revenue, and will chip rentals evolve from a minor sideline into a genuine business segment?
