Alphabet Inc. (NASDAQ: GOOG) stock rose over 4% in a single trading session, driven by investor optimism surrounding the company's aggressive push to monetize its artificial intelligence (AI) capabilities. The surge was catalyzed by two key announcements: the rollout of the Gemini 3.1 Pro model for enterprise clients and a strategic commerce partnership in Asia.
The company made its advanced Gemini 3.1 Pro model available in preview for Vertex AI and Gemini Enterprise customers, as well as to developers via the Gemini API. This "multimodal" model is designed for complex reasoning and tool-use tasks across text, images, audio, and video, aiming to integrate deeply into corporate workflows. Positive early feedback from developers reinforced the perception of tangible improvements in Google's AI offerings for businesses.
Concurrently, Alphabet announced a partnership with Sea Ltd to develop AI tools for its Shopee and Garena platforms. This collaboration is significant as Shopee holds a 52% market share in Southeast Asia's e-commerce sector, according to a Momentum Works report. The deal connects Google's AI narrative to a high-volume commercial channel where AI can directly impact metrics like conversion rates and ad efficiency.
This optimism unfolded against a challenging macroeconomic backdrop, with Q4 GDP growth reported at 1.4% (below forecasts of 2.2%) and a hotter-than-expected December PCE inflation print. Despite these headwinds, investor focus has shifted to the improving trajectory of Google Cloud, which is becoming a central battleground for AI services.
However, the bullish sentiment is tempered by significant concerns over capital expenditure. Alphabet has guided for 2026 capex between $175 billion and $185 billion, roughly double its 2025 spend of $91.4 billion and far exceeding consensus estimates of $115 billion. This disclosure initially contributed to a stock decline post-earnings.
Analyst opinions are divided. Wells Fargo's Ken Gawrelski upgraded Alphabet to Overweight, raising the price target to $387 (implying over 22% upside). He cited Alphabet's "data, distribution, and computing capacity" as key AI-winning traits and projected Gemini's average recurring revenue could triple to $12 billion by end-2027. Conversely, prominent investor Michael Burry questioned the sustainability of massive AI data center spending across hyperscalers, warning of potential cash flow consumption, increased borrowing, and understated depreciation that could pressure earnings. He estimated Alphabet's free cash flow could plummet 90% to $8.2 billion due to these investments.
