Why Alphabet Stock Topped the Market Today
Key Points
A media report stated that the tech giant will continue to push harder into AI.
It's apparently in talks to be a significant investor in a "neocloud" business.
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As the stock trading week came to a close on Friday, investors were doing more with Google parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) than just searching for websites -- they were snapping up its equity. Both share classes of the company enjoyed a roughly 4% rise on the day, comparing very favorably to the 0.7% increase of the bellwether S&P 500 index. Much of this stemmed from a media report on the tech sector giant.
Chipping away
That afternoon, The Wall Street Journal published an article stating that Google is planning to, in the newspaper's words, "expand the market for its artificial intelligence (AI) chips." It aims to do this by widening its existing AI efforts to better compete with the current AI hardware king, Nvidia.
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Image source: Getty Images.
Citing unnamed "people familiar with the matter," the Journal wrote that the core Alphabet business unit is providing increased financial support to data center partners. This, theoretically, will bolster AI deployment and implementation, and hopefully the company's AI revenue.
Management also aims to provide funding to AI-adjacent businesses. The newspaper added that, according to its sources, the company is currently in discussions to invest roughly $100 million in an early stage "neocloud" company, Fluidstack. "Neocloud" is a recently minted term for a specialist that focuses on providing cloud computing services to AI developers.
More than just a search engine
Although there has been some skepticism from the investing community about the often sky-high valuations of some AI companies, it's undeniable that demand for the technology is intense -- and likely to remain so. Alphabet is one of the rare companies with vast amounts of capital to spend on building out its AI offerings, and the know-how to turn them into gushing revenue streams. I feel that investors were right to be bullish on these apparent developments.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.
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