Alphabet (GOOGL-US), which was viewed as one of the biggest winners of the artificial intelligence (AI) boom over the past year, is now facing a severe test as the AI narrative rapidly reverses. Since its stock hit an all-time high on May 13, Alphabet has fallen approximately 15%, erasing $692 billion in market capitalization (approximately NT$21.9 trillion), making it the second-worst drag on the S&P 500 during that period.<\/p>\n
In the year leading up to May 13, Alphabet’s stock had surged more than 150%, far outpacing other members of the “Magnificent Seven” and ranking among the top 25 best-performing S&P 500 constituents over that stretch. However, that rally has reversed in just over three months, with core pressure coming from two directions: a continued exodus of key AI talent and delays in the development of its flagship Gemini 3.5 Pro model\u2014both of which have shaken investor confidence in Alphabet’s leadership position in the AI race.<\/p>\n
The turning point in market sentiment came on August 5. That day, Jeff Dean\u2014a central figure in Google’s AI strategy\u2014announced his departure to launch a startup, taking several prominent colleagues with him. Google DeepMind CEO Demis Hassabis also stepped down, transitioning to the role of chairman. Following the announcement, Alphabet’s stock plunged 4% in a single day, wiping out $186 billion in market value (approximately NT$5.9 trillion).<\/p>\n
The Double Blow of Talent Flight and Model Delays<\/p>\n
The talent pressure Alphabet faces has been building for months. Several months ago, two senior Google employees departed for Anthropic and OpenAI. Earlier this month, Jeff Dean’s exit\u2014along with the departure of multiple core colleagues\u2014pushed the issue into the spotlight.<\/p>\n
Angelo Zino, head of technology research at CFRA, said Alphabet has indeed experienced a degree of “talent flight,” which could pose a risk because one of the biggest questions on investors’ minds right now is whether tech companies can ultimately commercialize AI technology and turn a profit.<\/p>\n
That said, the AI talent war is not unique to Alphabet. The entire Silicon Valley is currently engaged in an intense battle for talent. Meta (META-US) reportedly offered a multi-year compensation package worth as much as $200 million (approximately NT$6.3 billion) to poach the head of Apple’s (AAPL-US) AI model team. OpenAI, meanwhile, attracted more than 400 Apple employees with generous salaries and stock options, prompting Apple to file a lawsuit against OpenAI for alleged theft of trade secrets.<\/p>\n
The more direct concern lies in the lagging development of Alphabet’s most powerful AI model, Gemini 3.5 Pro. The model is still being refined, particularly in coding capabilities\u2014an area where Alphabet is seen as having fallen behind Anthropic and OpenAI. Two weeks ago, Google released a new Gemini 3.7 Flash model but offered no timeline for Gemini 3.5 Pro’s launch.<\/p>\n
Divyaunsh Divatia, an analyst at Janus Henderson, noted that the market typically grants a higher valuation premium to AI winners with leading models, and the advantage Alphabet enjoyed over the past 9 to 12 months has gradually eroded.<\/p>\n
Google, for its part, maintains an optimistic stance. A Google spokesperson said the company’s AI product development pace and delivery cadence are at an all-time high, with Gemini 3.7 Flash becoming the fastest-growing model to date and Gemma downloads surpassing 1 billion.<\/p>\n
Capital Expenditure Surge Weighs on Free Cash Flow<\/p>\n
Financial pressures are equally significant. Alphabet’s stock weakened after its late-July earnings report, as investors grew uneasy about its hefty capital expenditures and negative free cash flow. The company announced a spending plan of $205 billion (approximately NT$6.5 trillion), raising concerns about runaway AI costs.<\/p>\n
In early August, Alphabet also raised $25 billion (approximately NT$790 billion) through the bond market, offering relatively attractive yields\u2014a move that further deepened market concerns about its funding needs.<\/p>\n
Divatia pointed out that Alphabet’s capital expenditures will increase significantly next year, and free cash flow could turn negative. The company has raised capital through both equity and debt markets to fund this race toward artificial general intelligence (AGI), leaving many investors unsettled.<\/p>\n
Alphabet’s recent stock performance against key events is summarized below:<\/p>\n
TimelineEventStock ImpactMay 13Stock hits all-time highUp more than 150% in prior 12 monthsLate JulyEarnings report shows massive capex, negative free cash flowStock declinesEarly AugustIssues $25 billion in bondsDeepens funding concernsAugust 5Jeff Dean departs, Hassabis steps down as CEOSingle-day drop of 4%, $186 billion market cap wiped outMid-AugustLaunches Gemini 3.7 Flash, no update on 3.5 Pro timelineMarket concerns unresolved<\/p>\n
Note: Market cap loss figures are compiled from various sources and may differ slightly across reports.<\/p>\n
Bulls and Bears Diverge; Next Earnings Report Is Key<\/p>\n
Alphabet’s recent weakness is also tied to sector rotation within large-cap tech stocks. Microsoft (MSFT-US) has rallied more than 25% since late July after reporting its fastest cloud computing growth in four years. By contrast, Alphabet has been sold off by investors due to high capital expenditures and free cash flow pressures.<\/p>\n
Even after the recent pullback of roughly 15%, Alphabet is still up about 65% over the past 12 months, continuing to outperform the broader market and other members of the “Magnificent Seven.” Some investors remain optimistic about Alphabet’s long-term prospects.<\/p>\n
Daniel Pilling, portfolio manager at Sands Capital Management, said talent turnover may not necessarily be a bad thing\u2014a new wave of talent could have the opportunity to reinvigorate Google and restore its competitiveness. He believes Google possesses world-leading AI chips and one of the largest computing resources globally, and in theory still has the foundation to succeed in the AI race.<\/p>\n
However, market patience is narrowing. Melissa Otto, head of technology, media, and telecom research at Visible Alpha, said she is less focused on which specific AI talent has departed and more interested in how Alphabet’s next earnings call will explain the actual performance of its AI business and how AI will ultimately translate into revenue and earnings growth for the company.<\/p>\n
NVIDIA’s (NVDA-US) latest fiscal 2028 sales outlook remains optimistic, which has somewhat alleviated concerns that the global AI capital expenditure boom is about to cool significantly. But for Alphabet, the key question going forward is no longer just whether it can continue pouring in more capital\u2014it is whether it can prove those investments are translating into genuine technological leadership and fundamental growth.<\/p>\n","protected":false},"excerpt":{"rendered":"Alphabet (GOOGL-US), which was viewed as one of the biggest winners of the artificial intelligence (AI) boom over…\n","protected":false},"author":2,"featured_media":153721,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[1483,53,319,5044,7718,36602,132,7543,16884,1122,320,157],"class_list":["post-153720","post","type-post","status-publish","format-standard","has-post-thumbnail","category-google","tag-alphabet","tag-anthropic","tag-apple","tag-deepmind","tag-demis-hassabis","tag-gemini-3-5-pro","tag-google","tag-google-deepmind","tag-jeff-dean","tag-meta","tag-microsoft","tag-openai"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/153720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/comments?post=153720"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/posts\/153720\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media\/153721"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/media?parent=153720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/categories?post=153720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ai\/wp-json\/wp\/v2\/tags?post=153720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}