The run-up in artificial intelligence (AI) continues to push the stock market to new highs. The Nasdaq-100 is up an impressive 43% so far, solidly outdistancing the S&P 500‘s gain of nearly 10%.
One outlier, however, is Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stock. Despite being a member of the “Magnificent Seven” cohort and boasting not only a fast-growing cloud business but also running a powerful internet advertising operation, Alphabet stock is up only 16% so far this year (at the time of this writing).
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There’s a lot to unpack with Alphabet stock, and some of the company’s investments are making some investors nervous. But if I had to buy one stock today, I’d tamp down my doubts, close my eyes, and buy Alphabet. Here’s why.
Why Alphabet is making investors nervous
The biggest opportunity for Alphabet is also its biggest challenge right now. Alphabet is one of several hyperscalers that have collectively committed $700 billion this year to build out their AI infrastructure. Alphabet plans to spend up to $190 billion in 2026, and it expects that figure to “significantly increase” in 2027.
The majority of that spending — an estimated 60% — is expected to go toward servers, including semiconductor chips that have a limited useful life before they must be replaced. Investors can’t be blamed for wondering whether Alphabet will be able to generate enough profits in a short time to pay for that kind of investment.
That’s why Alphabet stock fell in March, when planned 2026 capital expenditure (capex) figures first came out. And it’s why the stock dropped again in June when Alphabet announced plans to raise $80 billion to build out AI infrastructure. The announcement came on the heels of Alphabet raising another $85 billion through debt issuances over the last year.
Why Alphabet’s spending is justified
As mentioned, AI is both Alphabet’s biggest challenge and opportunity. Alphabet saw $110 billion in revenue in the first quarter of 2026, up 22% from a year ago, and Google Cloud revenue increased 63% to $20 billion. Alphabet says that its Google Cloud backlog nearly doubled from the previous quarter to more than $460 billion — and the company intends to realize about half of that as revenue in the next 24 months.
