Alphabet Stocks Bounce Back as Investors Warm Up to AI Spending

Alphabet's stock price surged by 3.9% on Friday as investors reassessed their confidence in large-scale AI spending following Amazon's impressive quarterly results.

The e-commerce giant, Amazon Web Services (AWS), reported a 37% revenue growth in the second quarter, marking its fastest rate in more than four years. This performance demonstrates the accelerating demand for cloud services and unusually high infrastructure investment.

Alphabet, Google's parent company, had previously faced pressure due to its increased capital expenditure plan of between $195 billion and $205 billion for 2026. However, despite a strong expansion in Google Cloud revenue, which reached 82% growth to $24.8 billion in the latest quarter, investors remained cautious about the impact on free cash flow.

The midpoint of Alphabet's capital-spending range is $200 billion, which is approximately $20 billion below Amazon's revised plan of $220 billion. Friday's rebound suggests that investors are distinguishing between spending that generates immediate cloud acceleration and investment whose returns remain uncertain.