Alphabet Stock Slips As OpenAI Expands Model Availability To Google Cloud
Key Stats for Alphabet Stock
- Change in Alphabet stock price over the last 6 months: -1%
- $GOOGL stock price as of Oct. 21: $335
- Highest price in the past 52 weeks: $409
- $GOOGL stock price target: $430
What Happened?
OpenAI will make its AI models available to developers through Google (GOOGL) Cloud. GPT products will be added to Google Cloud's model garden and its Antigravity coding tool in the coming weeks.
For people who own Alphabet stock, this is an important change after years of competition between the two companies.
This move means OpenAI's models will be available through all three leading cloud providers. Less than six months ago, Microsoft lost its exclusive license to OpenAI's technology.
The day after that agreement ended, Amazon announced plans to host OpenAI's models. Now Google is doing the same.
OpenAI said Google's long-term investment in AI has made Google Cloud a popular place to run AI workloads. The two companies also worked together last year.
OpenAI already uses Google's cloud services to run ChatGPT and its API.
Google Cloud has been growing very quickly. Its cloud revenue rose 82% in the second quarter, compared with 63% growth in the first quarter. Amazon's cloud business grew 37%, while Microsoft's grew 42%. All three companies will report their quarterly results next week.
The figures behind this growth are strong:
- Cloud operating income was $8.8 billion, more than 200% higher than a year earlier.
- Cloud operating profit margin rose to 35.6%, up from 20.7%.
- The value of work and orders waiting to be completed grew by more than $50 billion compared with the previous quarter.
What the Market Is Telling Us About Alphabet Stock
Making more OpenAI models available on Google Cloud could attract more developers and lead to more spending on its services.
It also shows how many companies are competing in this market. Alphabet now has to compete with OpenAI on Google's own platform.
Ramp, a company that provides payment cards for businesses, says most business spending on AI goes to OpenAI and Anthropic. Some companies have added Google's Gemini models to their systems, but Gemini is not the leading choice for business AI spending.
Google announced its next-generation Gemini 4 Argon model in September.
Costs are another concern. Alphabet raised its forecast for capital spending in 2026 to between $195 billion and $205 billion.
Free cash flow was negative $5.9 billion in the second quarter. Management also said Alphabet would use more computing capacity from other companies, which could put some pressure on Google Cloud's profit margins.
Alphabet's business is growing strongly, but the company also faces high costs and tough competition.
Next week's earnings report should help show whether demand for cloud services is still growing faster.
So what is Alphabet stock actually worth?
TIKR lets you estimate the future price of any stock in less than a minute. Enter a few assumptions into TIKR's valuation model to see what GOOGL stock might be worth. You can start with estimates that Wall Street analysts generally agree on, or change the numbers to match your own view of the business. The tool is free to use.
Disclaimer:
TIKR's articles are not financial or investment advice from TIKR or its content team, and they are not recommendations to buy or sell any stocks. TIKR creates its content using investment data from TIKR Terminal and estimates from analysts. The analysis may not include the latest company news or important updates. TIKR does not own positions in any of the stocks mentioned. Thank you for reading, and happy investing!