Alphabet’s AI Transformation: From Laggard to Leader

Alphabet is challenging OpenAI with renewed energy, a move that highlights Wall Street's acknowledgment of the Google parent’s emerging dominance in AI. This marks a stark change from last year when investors penalized the company, believing it was falling behind competitors.

In a recent earnings call, Alphabet's executives adopted a more confident stance following the release of the Gemini 3 model, which has impressed users and helped Google keep pace in the AI race. While they did not directly mention their chief competitor, OpenAI, the company emphasized its increasing returns from massive AI investments, leading to a potential doubling of capital expenditures by 2026.

Google’s confidence is underpinned by AI-driven growth across consumer and enterprise sectors. The Gemini app’s user base swelled to 750 million monthly active users by December, though still trailing OpenAI’s ChatGPT. Alphabet's soaring capital expenditure forecast initially unnerved investors, but strong cloud unit performance and AI proliferation across its business restored investor confidence.