Alphabet Inc. closed decisively above $2 trillion in market capitalization for the first time on Friday, as the powerhouse's earnings report reassured investors that the Google parent will be a major player in artificial intelligence.
The stock rose 10% to $171.95, its biggest one-day jump since July 2015, giving it a valuation of $2.15 trillion. The advance added nearly $200 billion to the company's market capitalization, marking the largest one-day increase in stock market history. Shares have gained 23 percent this year, compared with a 5.3 percent gain for the Nasdaq 100 index.
The $2 trillion milestone followed the company's results, where revenue beat expectations on the strength of its cloud computing unit. Cloud demand was boosted by growth in AI, while Alphabet also pleased investors by introducing a dividend and announcing a $70 billion buyback program.
“Alphabet is very well managed, its free cash flow is absolutely amazing, and its R&D budget is huge, so while no one knows which company has the best AI products,” Wayne Kaufman said. Gay, it's hard to bet against him,” Wayne Kaufman said. , Chief Market Analyst at Phoenix Financial Services.
While the stock breached the $2 trillion level on an intraday basis in 2021, and earlier this month, it's the first time Alphabet has closed above it. Doing so puts it in rarefied territory — only Apple Inc., Microsoft Corp., Saudi Aramco, and Nvidia Corp. has crossed this limit. Nvidia — driven by massive demand for its AI chips — surpassed $2 trillion earlier this year, while Amazon.com Inc. itself is no more than $2 trillion.
The road to $2 trillion has been somewhat rocky. The stock has been volatile amid some high-profile criticism of the company's AI offerings, and before the latest report, some investors questioned its ability to compete with firms like OpenAI in this key area, despite A lot has been spent in this field over the years.
Wall Street remains broadly positive on the stock, as about 85 percent of analysts tracked by Bloomberg recommend buying. Both revenue and earnings are expected to grow at a double-digit pace every year until 2026.
Also, the stock looks like a bargain. Shares trade at around 23.5 times estimated earnings, making it the cheapest of the so-called Magnificent Seven. The stock also trades at a discount to the Nasdaq 100, and is marginally above its 10-year moving average.
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This story was published without editing the text from a wire agency feed. Only the title has been changed.