Google rebounds as AI scale offsets rising capital costs

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Google rebound tests key resistance zone

Cloud growth faces return-on-capital test

At the same time, the fundamental base remains strong. In the second quarter, Alphabet’s revenue rose 24% y/y to $119.8 billion, Google Services increased 15%, Search & Other 17%, YouTube Ads 13%, while Google Cloud accelerated by as much as 82% to $24.8 billion. Operating income rose 30%, while the margin expanded to 34%.

But now the market is increasingly looking not at the pace of growth itself, but at the cost of that growth: CapEx for the quarter amounted to $44.9 billion, while for the first half of the year it had already reached $80.6 billion. In addition, Alphabet has taken on large future commitments related to data centers and capacity leases. Therefore, the next important test will be whether Cloud can maintain high growth rates while at the same time improving returns on invested capital, rather than simply expanding the infrastructure base.

Fed outlook keeps valuation pressure elevated

The risks this week are mainly macroeconomic. After the latest inflation data, the probability of a 25 bp Fed rate hike is estimated by the market at around 87–90%, while the 10-year Treasury yield has already risen toward 5%. For GOOGL, this creates double pressure: a higher risk-free rate reduces the acceptable valuation for growth stocks, while massive CapEx makes Alphabet particularly sensitive to the cost of capital.

More cautious Fed rhetoric could quickly restore interest in Big Tech, while a signal of several additional hikes could once again increase pressure even with strong operating performance. Analysts, meanwhile, generally maintain a positive view: most recent targets are above the current price, including $410 from Rosenblatt, $420 from Truist, $425 from RBC, and $465 from BMO.

$350 becomes key reversal threshold

On the 4-hour chart, GOOGL is attempting to break out of the local downward structure after holding support around $330–332. The current momentum has brought the price back toward $345–347, where the first major resistance zone is located, along with the area of short-term moving averages. Consolidation above $348–350 would improve the technical picture and open the way toward $355–360, where stronger resistance is located.

On the downside, as noted i Google attempts rebound as AI monetization offsets rate pressure, the nearest support now becomes $340–338, while a loss of this zone would bring $332–330 back into play. As long as the price holds above $340, the current rebound looks constructive, but a full upward reversal will require a breakout above $350 and, preferably, confirmation from a softer reaction in the bond market after the Fed decision.

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