For the first time, Alphabet Inc. closed sharply above a $2 trillion market valuation on Friday, as investors were comforted by a strong earnings report that the company behind Google will play a significant role in artificial intelligence. The stock saw its largest one-day increase since July 2015, rising 10% to $171.95, valuing the company at $2.15 trillion. The rise was one of the biggest single-day value additions in stock market history, increasing the company’s market capitalization by about $200 billion. This year, shares have increased by 23%, while the Nasdaq 100 Index has gained 5.3%.
The $2 trillion milestone came after the company’s performance, as its cloud computing division helped sales surpass forecasts. Growth in AI drove demand for cloud services, and Alphabet also thrilled investors by announcing a $70 billion repurchase program and establishing a dividend.
“Alphabet is tremendously well managed, its free cash flow is absolutely astonishing, and it has a massive R&D budget, so while no one knows what company will have the best AI products, this is a tough one to bet against,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services.
While the stock breached the $2 trillion level on an intraday basis in 2021, and again earlier this month, this is the first time Alphabet has closed above it. Doing so puts it into rarefied territory — only Apple Inc., Microsoft Corp, Saudi Aramco, and Nvidia Corp. have surpassed the threshold. Nvidia — driven by the massive demand for its AI chips — surpassed $2 trillion earlier this year, while Amazon.com Inc. isn’t far from $2 trillion itself.
The path to $2 trillion has been somewhat rocky. The stock has been volatile amid some high-profile criticism about the company’s AI offerings, and prior to the latest report, some investors had questioned its ability to compete with firms like OpenAI in this critical area despite spending heavily in the field for years.
Wall Street remains broadly positive on the stock, as nearly 85% of the analysts tracked by Bloomberg recommend buying. Both earnings and revenue are expected to grow at a double-digit pace every year through 2026.
In addition, the stock continues to look like something of a bargain. Shares trade around 23.5 times estimated earnings, making it among the cheapest of the so-called Magnificent Seven. The stock also trades at a discount to the Nasdaq 100, and is only modestly above its 10-year average multiple.
