Alphabet NASDAQ:GOOG has delivered a powerful 12-month run as investors continue to price in the company's growing AI position. The stock has more than doubled, adding more than $2 trillion in market value and lifting Alphabet's market capitalization to $4.3 trillion. That move has pushed Google's parent company to become the second-most valuable company in the world, up from fifth place a year ago. Alphabet was also added to the Dow Jones Industrial Average this week, highlighting how important the company has become to the broader market.
However, Alphabet's stock has started to lose momentum. Shares fell 6% in June and have traded lower in four of the past five months, including declines of more than 7% in February and March. The stock still gained 34% in April, helping Alphabet remain up nearly 15% this year, but that performance now trails the Nasdaq 100 Index's 19% rise. Alec Young of MoneyFlows said the move shows the fickleness of the AI trade, as investors appear to be shifting away from major AI spenders and toward chipmakers that are receiving much of that spending.
The pressure comes as Alphabet plans to raise about $85 billion through equity sales to fund capital expenditures, after previously saying it could spend as much as $190 billion on capex this year. Bloomberg Intelligence analyst Mandeep Singh said the capital raise could point to even higher 2027 spending, possibly reaching $300 billion. That level of investment could weigh on free cash flow, which is expected to fall from more than $73 billion in 2025 to $20.5 billion in 2026 and $14 billion in 2027. Still, Morgan Stanley analyst Brian Nowak raised his price target to $415 from $375, calling the pullback a possible tactical buying opportunity as Alphabet's AI, cloud, semiconductor, and advertising positions continue to support the long-term investment case.