By Adam Clark
Alphabet stock was rising early Monday ahead of its first day of trading in the Dow Jones Industrial Average.
The shares were up 1.2% in premarket trading. The Google-parent is replacing Verizon Communications in the 30-stock Dow index from Monday's session, in a move announced last week.
Because the Dow is a price-weighted index — meaning stock price rather than market capitalization determine the weighting of each company — few funds choose to replicate its composition. That means there is little or no boost from forced buying, unlike when a company is added to the S&P 500.
Alphabet's move comes amid a broader rebound for the Magnificent Seven group of stocks on Monday. The Roundhill Magnificent Seven exchange-traded fund has fallen 13% in June, on track for its worst month since the fund was created in April 2023.
Microsoft and Meta Platforms were rising 2%, while Nvidia, Amazon, Tesla were all up around 1%. Apple was the laggard, largely flat in premarket trading.
Investors might also be reacting to news that Google has such enormous demand for its artificial-intelligence computing capacity that it had to limit its usage by social-media company Meta Platforms, according to the Financial Times, which cited people familiar with the matter.
Google has capped Meta's use of its Gemini AI models, as well as that of some smaller clients according to the FT. Google and Meta didn't immediately respond to requests for comment from Barron's.
Although the loss of some potential revenue for Alphabet might appear to be negative, it's an indication of the perceived strength of Google's AI models.
Alphabet reported 63% revenue growth for its cloud-computing arm in the first quarter of the year, the strongest since it started disclosing the figure in 2019. TD Cowen analyst John Blackledge forecasts cloud revenue will grow at a 37% compound annual rate, rising from around $100 billion this year to $480 billion in 2031.
Write to Adam Clark at [email protected]
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