MOUNTAIN VIEW, California, September 2, 2026, 14:28 (PDT) – Alphabet’s stock is underperforming the S&P 500 by nine points, putting a spotlight on the company’s $44.9 billion challenge in attracting and retaining AI talent.
- Alphabet Class C shares closed up 0.5% at $333.78 on Wednesday.
- The stock declined about 6% over the past month, while the S&P 500 gained 3%.
- Cloud revenue rose 82% during the quarter, with capital expenditures amounting to $44.9 billion.
Alphabet Inc.’s Class C shares NASDAQ:GOOG gained 0.5% to close at $333.78 on Wednesday, while the stock remains roughly 6% lower over the last month. By contrast, the S&P 500 has risen approximately 3% during the same period.
The nine-point gap poses difficulties for AI recruitment regarding capital deployment. Alphabet reported $44.9 billion in property and equipment expenses last quarter, alongside negative free cash flow of $5.9 billion.
The logic is clear. While computing power can be purchased, research leadership and expertise in models cannot be easily replaced.
Alphabet Class C: six-session close
Dollars per share; regular-session closes
As of . Source: Yahoo Finance historical data.
Eric Sheridan of Goldman Sachs pointed to two key issues affecting the slump. One centers on Search growth falling short of expectations. “The second bigger theme that’s weighed on it is there’s been brain drain,” he said. Yahoo Finance interview
Concerns grew in August. Demis Hassabis moved from his role as DeepMind chief executive to take on the positions of chairman and chief scientist at Alphabet. Jeff Dean left after 27 years to start a new venture with colleagues.
Competition reaches further than senior leadership. Current and past employees say Meta Platforms Inc. NASDAQ:META and Microsoft Corp. NASDAQ:MSFT are luring talent with competitive pay. Both OpenAI and Anthropic are also appealing, thanks to private-company equity, Fortune reported.
Three steps in the AI talent repricing
Noam Shazeer joined OpenAI. John Jumper departed for Anthropic.
Hassabis became chairman and chief scientist. Dean prepared a new venture.
Goldman’s Sheridan identified talent departures as a major drag on the shares.
Sources: Axios, Fortune, and Yahoo Finance.
The financial effect is substantial. Google Cloud’s second-quarter revenue surged 82%, totaling $24.8 billion. Operating income from the cloud division rose more than threefold to $8.8 billion.
Chief Executive Sundar Pichai said AI investments were “redefining what’s possible across every part of our business.” Gemini models processed 22 billion API tokens each minute, and the Gemini app reached 950 million users monthly. Alphabet earnings release
Alphabet’s Q2 AI economics
Quarter ended June 30, 2026; dollars are U.S. billions
Source: Alphabet Q2 2026 earnings filing and Form 10-Q.
The cost base now incorporates spending on talent. Research and development costs rose by $4.4 billion to $18.2 billion, with $2.9 billion of the increase linked to employee compensation.
Retention costs align with a shift in funding approach. Alphabet raised $49.6 billion via issuances of common stock and mandatory convertible preferred stock. The company had no share buybacks during the quarter.
This places execution at the heart of valuation. Strong cloud earnings supply capital needed to attract top researchers. Any delays or repeated departures risk making each infrastructure dollar appear less productive.
A common dividend of $0.22 per share will be paid to shareholders of record as of September 7, with payment set for September 14.
Risks involve a possible increase in departures, which could lead to higher compensation costs or delays in rolling out models. Faster monetization of cloud services might offset the gap in performance. Profit growth remains primarily fueled by the ongoing expansion of search.
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