New York, June 22, 2026, 11:01 EDT
- Alphabet shares dropped roughly 5.6% on Monday, extending a slide from their May high. Investors reacted to concerns over AI costs, new share sales and another round of top management changes.
- Citizens is sticking to its Market Outperform rating on Alphabet and left its $515 price target unchanged, despite news that Gemini co-lead Noam Shazeer will leave for OpenAI.
- Another factor is the looming $40 billion at-the-market stock sale program. Alphabet plans to roll this out in the third quarter, so more shares could hit the market even if Google Cloud demand holds up.
Alphabet Class A shares dropped in late morning Nasdaq trade Monday after Citizens gave new support to the stock. Investors focused on Google’s losses in AI staff and the cost of its data-center expansion. Shares changed hands at $347.53, off $20.50.
Market focus is shifting now as Alphabet’s top line keeps moving up. First-quarter revenue was $109.9 billion, up 22%, and Google Cloud pulled in $20.0 billion, a gain of 63%. The big question for investors: How much cash, stock or headcount will Alphabet need to keep those numbers growing with OpenAI, Anthropic, Microsoft and Amazon pushing hard in AI?
Citizens kept its Market Outperform rating and $515 price target, Investing.com said, as Shazeer gears up to join OpenAI. The firm flagged risks around “acquihires”—deals made mostly for staff—especially after Google spent $2.7 billion in 2024 to license Character.AI tech and bring Shazeer’s team back. Investing.com
Shazeer, Google’s vice president of engineering and co-lead of the Gemini project, is heading to OpenAI, according to Reuters last week. Shazeer posted on X that he was “incredibly proud of the amazing team at Google and everything we’ve built together.” Google said it was grateful for his work. Reuters
John Jumper is also leaving. The Nobel-winning Google DeepMind scientist, famous for his work on AlphaFold, said he’s moving to Anthropic. “There is so much demand for limited AI research talent that the frontier AI research labs are willing to do whatever it takes to add them,” D.A. Davidson analyst Gil Luria told Reuters. He said OpenAI and Anthropic offer less bureaucracy and more focus. Reuters
But the bigger issue for the market might not be about one engineer, no matter how senior. The real shift is happening on the balance sheet. Alphabet has switched from a capital-light model, built on ad profits and stock buybacks, to a more capital-intensive setup. Now it is spending heavily on chips, data centers, power, and networking equipment—at a scale few have tried. Contributor Florian Muller at Seeking Alpha cut his rating on the stock to Hold, pointing to this transition and a valuation he sees as stretched. He still sees support from revenue, margins and YouTube monetization.
Alphabet told investors it expects capital expenditure to total $180 billion to $190 billion this year and to jump again in 2027. The spending goes to long-term assets like data centers and servers. CFO Anat Ashkenazi said during the April earnings call that Alphabet is facing “unprecedented internal and external demand for AI compute resources.” Alphabet Investor Relations
Bulls are sticking around, and Alphabet’s numbers show why. Google Cloud’s backlog almost doubled from the previous quarter to hit $462 billion at the end of Q1. The company expects a little more than half to turn into revenue in the next two years. Free cash flow dropped to $10.1 billion for the quarter, after capital spending, laying out the trade-off in starker terms than the earnings line.
Share-sale structure is the key factor here. In June, Alphabet’s filing showed its equity raise grew to $84.75 billion, with a $40 billion at-the-market program included. That ATM setup lets the company drip stock into the open market over time. Alphabet said it isn’t planning to start selling shares this way until the third quarter. The company said proceeds from the sales are going mostly to change the way it handles tax bills tied to employee equity grants, not to fund AI data centers directly.
The next few months might get messy for investors. Even if a stock posts solid operating numbers, it could still trade lower if the market expects new supply. The same filing said parties involved in Alphabet’s capped-call deals may buy or sell Alphabet shares to stayhedged. Capped calls are derivatives meant to limit the dilution caused by convertible securities. Those trades can move the share price, the filing said.
Citizens analyst Andrew Boone keeps a bullish view, saying the case for Google is solid. “Google may be the best positioned company to take advantage of AI given its vertical integration from search to custom hardware,” Boone told TipRanks. He pointed to Alphabet’s grip on its own products, AI models and Tensor Processing Units, or TPUs, which are its own AI chips. TipRanks
The bear case looks clear. Cloud backlog might take longer to turn into revenue, AI compute could get cheaper, or Gemini might slip behind OpenAI and Anthropic now that key people have left. If any of that happens, Alphabet faces higher depreciation, more share dilution, and weaker free cash flow. Investors are cutting not only for AI risk, but also for the cost of keeping Google competing.
