SAN FRANCISCO, United States, Feb 5 (Reuters) – Alphabet is taking on OpenAI with enthusiasm that reinforces Wall Street’s perception that Google’s parent company is a leader in artificial intelligence, a turnaround from a year ago, when investors thought the company was far behind its competitors.
This was evident in the confident tone of Alphabet executives on the conference call with analysts following the publication of quarterly results the day before, the first since the company launched the Gemini 3 model.
But Alphabet’s shares fell more than 3% this Thursday, after the company announced investment projections of up to US$185 billion this year, deepening investor concern, as spending could more than double compared to 2025 and overshadow that spent by rivals Microsoft, Meta and Amazon.
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“We are quickly approaching more than $1 trillion in combined investment by 2026 among megaenterprises, if we consider both investments and associated resource needs,” said Bernstein analyst Mark Shmulik.
“For that trillion to be profitable, the total addressable market for AI-based products and enhancements needs to be a multiple of that very quickly.”
For now, investments in AI are generating returns, and Google shares remain up 80% over the last 12 months, even with Thursday’s drop.
“Overall, we are seeing our investments in AI infrastructure drive revenue and growth across the board,” said Alphabet Chief Executive Sundar Pichai.
Google’s conviction about AI-driven revenue is backed by growth in both its consumer and enterprise businesses.
Pichai said the Google Gemini app, which competes with OpenAI’s ChatGPT, surpassed 750 million monthly active users at the end of December, compared to 650 million at the end of September.
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That still lags behind ChatGPT, which, according to OpenAI chief executive Sam Altman, surpassed 800 million weekly active users in October.
“We are also seeing significantly higher engagement per user, especially since the launch of Gemini 3,” Pichai said.
Gemini 3 has also been integrated into “AI Mode” in Google’s search engine and powers Google’s enterprise version of Gemini, which Pichai says has reached 8 million paid licenses.
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CHANGING TIDE
Since the beginning of last year, Alphabet has gone from a laggard to a leader among the seven largest technology companies in the world and is now only equaled by Nvidia and Apple among companies with a market value of more than US$4 trillion.
Despite striking a relatively modest tone regarding investments for the year, Microsoft shares took a sharp dive last week, in part due to growing market concerns about the company’s dependence on OpenAI. Microsoft said its fiscal third-quarter investments will decline from the record $37.5 billion spent in October-December.
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With OpenAI closing a series of multimillion-dollar deals despite still losing money, investors are worried about the company’s ability to finance these commitments, hurting confidence toward the big tech companies with which it has close ties.
Paul Meeks, head of technology research at Freedom Capital Markets, said Alphabet is benefiting from a contrast in market confidence despite an “eye-watering” investment forecast.
“I think a narrative is emerging where the market is favoring Google over OpenAI,” Meeks said. “Last year at this time, every announcement from OpenAI to do business with anyone was applauded. But then at the end of 2025, people were saying, ‘Oh my God, a lot of my accrued revenue or AI infrastructure spending comes from OpenAI.'”
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Shares of Oracle, whose contract portfolio of more than $500 billion depends largely on OpenAI, have fallen about 49% since the beginning of October. Microsoft, which holds a 27% stake in OpenAI and considers it a major customer, has depreciated by more than 20% in the same period. Meanwhile, Alphabet rose about 36%.
“The agreements OpenAI has with Microsoft and Oracle are highly tied to its ability to raise future funds,” said Dan Morgan, portfolio manager at Synovus Trust. “I think that’s why you’re seeing the market favor Alphabet.”
Alphabet’s vast war chest has been fueled by big deals the company struck in recent months to provide products and infrastructure to technology companies Meta and Apple.
“Right now, Google is on the rise,” said Eric Clark, portfolio manager of the LOGO ETF.
