Why Alphabet Stock Popped Today

Alphabet (GOOG +4.55%) (GOOGL +5.03%) stock jumped 5.1% through 12:55 p.m. ET Monday after analysts at Morgan Stanley reassured investors about the company's prospects amid record levels of investment in AI infrastructure. Image source: Alphabet. Alphabet Q2 earnings Alphabet reported strong earnings last week, beating expectations with profits of $9.11 per share -- triple what analysts expected. Surprisingly, Alphabet stock sold off after the report and, in fact, continued to trade below its pre-earnings price all the way through Friday. Earnings beat notwithstanding, investors were spooked by Alphabet's announcement that it was doubling down on AI spending and raising its forecast for capital investment this year to a mind-bending $195 billion to $205 billion. ExpandNASDAQ: GOOGAlphabetToday's Change(4.55%) $16.22Current Price$372.87Key Data PointsMarket Cap$4.4TMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.Day's Range$363.26 - $376.1052wk Range$190.92 - $404.47Volume17.5MAvg Vol22.3MGross Margin60.94%Dividend Yield0.24% What Morgan Stanley said about Alphabet's spending But according to Morgan Stanley -- that's OK. All four of the big AI hyperscalers are spending gobs of money on AI investment. Amazon (AMZN +4.06%) is spending even more than Alphabet -- $220 billion from $200 billion -- while Meta (META +6.18%) has a $130 billion to $145 billion budget, and Microsoft (MSFT +5.38%) is spending about $190 billion. Total cloud capital expenditure in 2027 could exceed $1.2 trillion this year, says MS. But all this investment is driving huge cloud revenue growth, with Google Cloud Platform growing 82% year over year. The best news, says the analyst, is that "strong operating cash flow, equity and debt financing, leasing strategies, custom chips, and infrastructure efficiencies are helping fund capex while easing free cash flow pressure," leaving Alphabet with still $53.3 billion in positive FCF over the past 12 months. For now, the analyst isn't worried about how much money Alphabet is spending. Let's see if Morgan Stanley feels the same next year, when AI spending leaves Alphabet with a free cash flow loss.Read NextAug 3, 2026 •By Leo SunGreg Abel Poured $23 Billion of Berkshire's Cash Into Alphabet StockAug 2, 2026 •By Rachel Warren8 Best Self-Driving Car Stocks for 2026 and How to InvestAug 2, 2026 •By Brett SchaferWarren Buffett Stepped Back From Berkshire Hathaway With a Bang; Its Investment in 1 AI Stock Now Tops $30 BillionAug 2, 2026 •By Robert IzquierdoIonQ vs. Alphabet: What Revenue Trends Reveal About the Quantum Computing Chipmaker and the Artificial Intelligence GiantAug 1, 2026 •By Robert IzquierdoNvidia vs. Alphabet: What Do Revenue Trends Tell Investors About These Artificial Intelligence Companies?Aug 1, 2026 •By Robert IzquierdoAlphabet vs. IBM: What Diverging Revenue Trends Tell Investors About These Artificial Intelligence CompaniesAbout the AuthorRich Smith is a contributing Motley Fool defense and stock market analyst covering publicly traded and emerging companies in defense, space, aerospace, and other sectors. Prior to The Motley Fool, Rich practiced international corporate law for Clifford Chance in Russia, and for the Russian-Ukrainian Legal Group in Moscow, Kyiv, and Washington, D.C. He holds a bachelor’s degree in international relations from the College of William & Mary, a law degree from the University of Baltimore, and a language certification from the International Institute of Russian Language & Culture in Tver, Russian Federation. The Globe and Mail once featured him as “one of the best stock pickers since 2009.”TMFDittyX@RichSmithFoolStocks MentionedAlphabetNASDAQ: GOOG$373.19(+4.64%)+$16.54Motley Fool Stock Advisor’s Latest PickGet Access---% Avg ReturnMicrosoftNASDAQ: MSFT$489.58(+5.35%)+$24.86AlphabetNASDAQ: GOOGL$374.15(+5.06%)+$18.02AmazonNASDAQ: AMZN$282.55(+4.04%)+$10.97Meta PlatformsNASDAQ: META$591.12(+6.18%)+$34.41*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.