Key Takeaways
- Alphabet is the top performer among Magnificent Seven stocks this year
- Google Cloud posted 30% YoY growth for second consecutive quarter
- Search advertising revenue grew 15% to $56.6 billion with AI enhancements
- Gemini AI app now has 650 million monthly active users
Alphabet has emerged as the strongest performer among the Magnificent Seven stocks this year, outperforming even Nvidia, with CEO Sundar Pichai proving his critics wrong about his ability to lead Google through the AI revolution.
From Crisis to Comeback
When ChatGPT launched in November 2022, many questioned whether Sundar Pichai had the toughness to be Google’s “wartime CEO.” Some blamed Alphabet’s corporate culture, while others pointed to protectionism over advertising revenue. Today, that skepticism has vanished as Pichai’s strategic decisions pay off.
The ChatGPT launch became Google’s “Pearl Harbor moment” – not an endpoint but a wake-up call that forced full commitment to AI. Pichai’s key move was restructuring to empower DeepMind founder Demis Hassabis, treating him as an asset rather than a threat.
Early Stumbles and Recovery
Google’s initial response faced challenges. The rushed Bard (now Gemini) launch included demonstration errors, with employees calling the chatbot “a pathological liar” and “worse than useless.” The AI image generator’s historical inaccuracies provided ammunition for critics of “woke AI.”
Major concerns included Microsoft’s OpenAI partnership threatening Google Cloud, and chatbots potentially disrupting the $56.6 billion search advertising business.
The Turnaround Numbers
Under Pichai’s leadership, Google Cloud achieved 30% year-on-year growth for two consecutive quarters, driven by integrated AI capabilities. The company’s custom AI chips are gaining traction as cheaper Nvidia alternatives, with Anthropic committing to use 1 million units.
Contrary to fears, AI expanded Google’s core business:
- Search advertising grew 15% to $56.6 billion
- Gemini AI app reached 650 million monthly active users
- Nano Banana image generator created over 5 billion images
- Veo 3 generated more than 230 million videos
Google’s Unmatched Advantages
Google’s AI arsenal includes proprietary data superior to scraped internet content. The company hasn’t fully demonstrated how it could integrate Maps, Gmail, YouTube and productivity tools into a personal assistant with unmatched user knowledge.
Recent developments include:
- AI features coming to Chrome browser
- Android platform already enhanced with AI
- Potential powering of Apple’s Siri assistant
Revenue opportunities are clear: imagine Gemini recommending movies, showing YouTube trailers, booking tickets via Google Pay, and arranging transportation through Waymo – all using Google’s integrated ecosystem.
The Integration Challenge
While competitors discuss future partnerships, Google already possesses these capabilities after decades of organizing global information. Pichai’s task is managing the delicate integration process. If successful, it would require “something truly seismic” to beat Google in consumer AI.
Dave Lee is Bloomberg Opinion’s US technology columnist, formerly with Financial Times and BBC News.
