Google AI expansion supports recovery despite heavy CapEx
Alphabet is trading around $344 on September 15 after a strong rebound from the $330-332 area, although the stock still remains well below its May peak above $400. Yesterday, Alphabet shares gained more than 3% amid a reassessment of the AI sector: investors began to view large software platforms with their own models and cloud infrastructure more favorably, while some chipmakers came under pressure.
287.00
326.23
For Google, such a shift looks particularly important, as a potential slowdown in the race to develop the most powerful AI models could reduce the relative advantage of companies that currently lead in computing power and give Alphabet more time to develop Gemini, TPU, and commercial AI products.
Cloud and TPU strengthen growth profile
Fundamentally, Google Cloud remains Alphabet’s main growth driver. In Q2, the company’s revenue rose 24% year over year to $119.8 billion, Google Services increased 15% to $94.5 billion, Search & Other grew 17%, and YouTube Ads rose 13%. At the same time, Cloud accelerated by as much as 82% to $24.8 billion, while its operating margin reached 35.6%.
Another positive factor is the rapid development of the TPU business: Google Cloud already says that its proprietary AI chip business is more than twice the size of the nearest competitor among hyperscalers, while a significant portion of revenue from standalone TPU sales is expected to begin contributing more meaningfully to results in 2027.
Infrastructure spending remains key risk
The main risk remains the cost of this growth. Alphabet raised its 2026 CapEx forecast from $180-190 billion to $195-205 billion, while spending could increase significantly again in 2027. In Q2, CapEx had already reached $44.9 billion, while free cash flow turned negative at around $5.9 billion.
In addition, the company is temporarily increasing its use of third-party computing capacity due to a shortage of its own capacity, which, according to management, could put moderate pressure on margins in the coming quarters. Therefore, the market is now assessing not so much the growth rate of AI businesses itself, but Google’s ability to prove that Cloud, Gemini, and TPU can scale faster than infrastructure spending.
$350 breakout could improve technical picture
From a technical perspective, on the hourly chart GOOGL has recovered from a local low near $330 and returned to the $344 area, but it still remains within a broader sideways range after the decline from $380-400. The nearest resistance zone is $347-350: a sustained move above it would improve the short-term structure and open the way toward $355-360. On the downside, the $338-340 area remains important, followed by $330-332.
As long as the price holds above these levels, the scenario of further recovery, as I noted in Google rebounds as AI scale offsets rising capital costs, remains intact, although a full bullish reversal would require a breakout above $350 followed by a return toward $360.
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