Alphabet's market capitalization briefly surpassed Nvidia this week, driven by a 160% stock increase over the past year. This surge reflects Wall Street's assessment that Google is strategically positioned across the artificial intelligence landscape, leveraging its proprietary models, extensive distribution networks, and cloud infrastructure. Gene Munster, managing partner at Deepwater Asset Management, noted that Google, like Elon Musk's SpaceX, which merged with xAI in February in a $1.75 trillion deal, owns "most of the stack" including chips, models, infrastructure, and distribution, while remaining "nicely profitable."
Following Alphabet's earnings report last week, JPMorgan analysts designated the stock as their "top overall pick" in the tech sector, citing a "standout quarter" and accelerating growth. The company's cloud backlog nearly doubled to $462 billion. Mizuho analysts raised their price target, asserting that current consensus estimates significantly underestimate Google Cloud's revenue and operating income for the next two years.
Alphabet concluded the week with a market cap of $4.8 trillion, trailing only Nvidia's $5.2 trillion. The momentary flip-flop in market leadership occurred after a report on Tuesday revealed that AI model developer Anthropic committed to spend $200 billion on Google Cloud over five years for 5 gigawatts of compute. Google declined to comment on the report, referring to CFO Anat Ashkenazi's previous earnings call commentary.
Unprecedented Capital Accumulation
Concerns have been raised by some analysts regarding concentration risk, suggesting that a substantial portion of Google's cloud backlog could originate from Anthropic, a startup described as "cash-burning and richly valued." Anthropic is reportedly raising tens of billions of dollars from Google, which it then largely expends on Google's cloud services and Tensor Processing Units (TPUs). Gil Luria, an analyst at D.A. Davidson, drew parallels to Oracle, whose stock soared in September after a nearly 360% backlog increase, only for investors to later discover that most of this increase stemmed from OpenAI commitments. Luria stated, "They did it the same way Oracle did. They told us their backlog roughly doubled without telling us that almost the entire increase came from one deal with Anthropic."
Luria further noted that Microsoft, Oracle, Amazon, and Google collectively report close to $2 trillion in cloud backlog, with nearly half of this figure traceable to commitments from OpenAI and Anthropic. Munster dismissed concerns about single customer risk, stating, "If one of those customers blows up, over time there will be dozens to take its place," underscoring the relentless drive for capital accumulation.
The Illusion of Competition
Google's emerging advantage lies in custom silicon. Mizuho estimates that approximately $61 billion of Google's cloud backlog through 2027 could be generated from sales of its TPUs, with most of this revenue expected next year. This offers investors an alternative avenue to participate in the AI hardware trade, a sector that has seen shares of Advanced Micro Devices, Intel, and Micron more than double this year. However, Luria pointed out that much of the demand for Google's and Amazon's in-house chips, such as Amazon's Trainium, comes from their own portfolio companies, describing it as "captive demand" rather than organic market growth.
Google projects capital expenditures of up to $190 billion this year, more than double its capex for 2025. Analysts at Argus, in a report following earnings, acknowledged "risks of Alphabet's capex spend" but maintained a buy rating, viewing the company's capacity to afford such expenditures as a "competitive advantage" over smaller entities like OpenAI. This demonstrates how the sheer scale of accumulated capital functions to suppress competition and consolidate market power.
Managing the Contradictions
Paul Tudor Jones, a prominent capitalist, remarked that the U.S. is "late to regulating AI" and asserted, "We should have already done it." This call for regulation, reported by CNBC, emerges amidst the unchecked expansion and concentration of wealth within the AI sector, suggesting a desire to manage the system's contradictions rather than fundamentally alter its mechanisms of surplus extraction and capital dominance.