TLDR
- Alphabet stock rose nearly 5% on Monday as it officially joined the Dow Jones Industrial Average, replacing Verizon Communications.
- It marked the strongest first-day Dow debut since Dow Inc. joined in 2019, with no other addition since then rising more than 0.7%.
- Despite the jump, Alphabet is still tracking for its worst month since February last year after losing roughly 10% over the prior month.
- Reports suggest Alphabet’s AI compute capacity is limited, with enterprise customers like Meta Platforms reportedly hitting usage restrictions.
- Alphabet’s cloud revenue grew 63% year over year last quarter, with TD Cowen projecting it could reach $480 billion by 2031.
Alphabet stock climbed close to 5% on Monday. The gain came as the Google parent officially entered the Dow Jones Industrial Average, taking the spot vacated by Verizon Communications.
It was the best first-day performance for a new Dow stock since 2019. Back then, Dow Inc. joined the index and set the bar that Alphabet just cleared.
Six other companies have joined the 30-stock average since 2019. None of them rose more than 0.7% on their debut day, making Monday’s move stand out.
The rally helped lift the broader Dow as well. Tech stocks across the board traded higher alongside Alphabet, with several AI-linked names joining the move.
Still, the bigger picture isn’t all smooth sailing. Alphabet is on pace for its worst month since February of last year, having lost around 10% over the past month before Monday’s bounce.
That’s a sharp turn from May, when Alphabet briefly overtook Nvidia by market capitalization after-hours to become the world’s most valuable company. Six of the past seven weeks have ended in the red for the stock.
Why Investors Are Watching AI Execution
The Dow inclusion itself carries more symbolic weight than financial muscle. Alphabet was already part of the S&P 500 and Nasdaq 100, so there’s limited forced buying tied to the index switch.
History also isn’t kind to recent Dow newcomers. Nvidia, Salesforce and Apple all traded lower 60 days after joining the index, a pattern Alphabet will want to avoid.
Much of the pressure on Alphabet stems from questions over its AI spending payoff. Lower-cost Chinese models are improving fast, and DeepSeek has said a new version of its open-source model is arriving within two weeks.
Talent has also been leaving Google DeepMind for rivals including Anthropic and OpenAI. Noam Shazeer, the former Gemini co-lead who departed for OpenAI, reportedly pointed to reduced compute access as part of his frustration.
Compute itself has become a real constraint. Alphabet reportedly doesn’t have enough capacity to meet enterprise demand, including from Meta Platforms, and is said to be turning to outside infrastructure providers such as SpaceX to fill the gap.
Alphabet has not responded to requests for comment on the reported Meta usage limits.
Cloud Growth Remains a Bright Spot
Despite the strain, Alphabet’s cloud unit keeps delivering. Revenue from the segment rose 63% year over year last quarter, the fastest growth rate since Alphabet began breaking out the division separately.
Analysts at TD Cowen see that momentum continuing. They project cloud revenue could grow at a 37% compound annual rate, hitting roughly $480 billion by 2031, up from about $100 billion this year.
That growth isn’t free, though. Alphabet’s cash pile has been shrinking, and the company skipped buybacks in the first quarter for the first time in nearly a decade.
It has also raised more than $140 billion in debt and equity as the costs of competing in the AI infrastructure race keep climbing.
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