Alphabet Shares Fall About 17 Percent From Their May Peak as an AI Leadership Reshuffle Meets a 205 Billion Dollar Spending Plan
Alphabet shares have fallen sharply from their spring peak as investors weigh a wave of senior AI departures at Google against a sharp escalation in the capital spending required to compete in artificial intelligence. Bloomberg, using 13 May as the peak date, put the decline at about 15 percent and the lost market value at 692 billion dollars. On our calculation, using CNBC’s own data, Alphabet Class A shares closed at 340.65 dollars on Thursday against a 408.61 dollar 52 week intraday high reached on 18 May, a decline of about 16.6 percent. The two figures use different benchmarks, a peak closing price against a 52 week intraday high, rather than one being wrong.
A Reshuffle at the Top of Google’s AI Division
Google announced on 5 August that Demis Hassabis is moving from chief executive of Google DeepMind to chairman of that unit while also becoming Alphabet’s chief scientist, with DeepMind’s technology chief, Koray Kavukcuoglu, taking over day to day leadership of the AI division and reporting to chief executive Sundar Pichai, according to Reuters. The same day, chief scientist Jeff Dean left the company after 27 years to launch a new public benefit corporation, Discovery Loop, focused on applying AI to science and engineering; 3 other senior Google AI and engineering figures, Sanjay Ghemawat, Oriol Vinyals and Quoc Le, left alongside him to co-found the venture, which has received investment from Google and a computing capacity partnership with Google Cloud. Alphabet shares fell about 4 percent on the announcement.
The reshuffle came while the flagship version of Google’s latest Gemini model remained unreleased despite a planned June launch; Hassabis separately cited progress on the company’s next major model, Gemini 4. That delayed flagship model is Gemini 3.5 Pro, and Google released 3 lighter Gemini variants in the interim, according to CNBC.
A 205 Billion Dollar Spending Plan
Alphabet’s own Q2 2026 earnings release shows the scale of the buildout behind the AI leadership questions. Consolidated revenue rose 24 percent year over year to 119.8 billion dollars, and Google Cloud revenue rose 82 percent to 24.8 billion dollars, ahead of Amazon Web Services, which grew 37 percent to 42.2 billion dollars, and Microsoft Azure, which grew 43 percent. Cloud operating income reached 8.8 billion dollars, more than three times the 2.8 billion dollars a year earlier.
Alphabet spent 44.9 billion dollars on capital expenditure in the second quarter alone against operating cash flow of 39.1 billion dollars, producing negative free cash flow of 5.9 billion dollars, the company’s first negative quarterly free cash flow on record. Alphabet raised its 2026 capital expenditure guidance to a range of 195 to 205 billion dollars, up from a prior 180 to 190 billion dollars, and said it expects an even higher figure in 2027. Amazon subsequently raised its own 2026 capex guidance to 220 billion dollars from 200 billion dollars, which Wall Street had partly anticipated after Alphabet’s increase.
| Company | 52 Week High | 1 Month Return |
|---|---|---|
| Alphabet Class A (US) | $408.61 (18 May) | +4.3% |
| Microsoft (US) | $553.72 (28 Oct 2025) | +29.8% |
On our calculation, both stocks have risen over the past month, but Microsoft’s gain is nearly seven times the size of Alphabet’s over the same period. The sharper contrast is over three months, where Alphabet is down about 12.4 percent against Microsoft’s roughly 22 percent gain, a period that captures the market’s reaction to Alphabet’s capex guidance raise and the August leadership changes.
Why it matters
Alphabet’s stock swings are a live test of how investors are pricing the biggest AI spenders. Google Cloud’s 82 percent growth and expanding operating income show the AI buildout is generating revenue, but a first negative quarterly free cash flow on record and a capital expenditure plan that could reach 205 billion dollars this year, on top of a leadership transition in the unit building the underlying models, show what that growth is costing and who is currently running it.
Outlook
Alphabet’s next scheduled earnings date is 27 October, which will be the next opportunity to update guidance on capital spending, free cash flow and Gemini 3.5 Pro, which still has no confirmed release date.
Sources: Bloomberg, Reuters, CNBC, Alphabet, Amazon.
