Google pulls back as AI spending comes into focus

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Google tests support amid AI pressure

Cloud growth remains the core support

Still, the fundamental picture remains much stronger than the current price action suggests. In the second quarter, Alphabet increased revenue by 24% year over year to $119.8 billion, Google Services grew by 15% to $94.5 billion, and Search & Other rose by 17%. The main growth driver was Google Cloud, where revenue jumped 82% to $24.8 billion on strong demand for AI infrastructure, enterprise AI solutions, and core cloud services.

The group’s operating income increased by 30%, while the operating margin expanded to 34%. The scale of Cloud growth is becoming increasingly important for Alphabet’s valuation, as the company gradually moves away from being viewed as a business that is almost entirely dependent on advertising.

Gemini race and infrastructure costs shape sentiment

Pressure on the stock in recent sessions has also been linked to intensifying competition in AI. The market reacted nervously to growing interest in Meta Muse, although Google is also preparing the next generation of Gemini. According to reports from September 24, Gemini 4 is already in the early stages of post-training and could be released before the end of the year.

In addition, Alphabet is sharply increasing spending on computing infrastructure and raised around $49.6 billion in new capital in June, including funding for the expansion of AI infrastructure and global computing capacity. This raises the risk of pressure from depreciation and operating expenses, so investors are paying closer attention to returns on TPUs, data centers, and Gemini.

The regulatory backdrop has become somewhat less severe following the court’s decision in the ad tech case. Google was not required to sell AdX or DFP, although the company will have to open parts of its advertising infrastructure to competitors, provide greater data access, and operate under six years of independent oversight. Overall, Alphabet’s fundamental trend remains strong, but after the recent rally, the stock has entered a phase of revaluation.

$336 support becomes the next test

The decline toward support near $336 points to increased vulnerability among buyers, but even if this support is broken, downside in GOOGL could be limited by the next support area around $328. A break above resistance near $343, as I wrote in the article Google approaches a breakout as Cloud momentum holds, could open the way toward $348–350.

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