Institutional Buying and Doubts Collide as Alphabet’s AI Infrastructure Bill Hits $190 Billion

Alphabet's market value surges past $4.8T as cloud revenue spikes 63%, but huge AI capex and valuation fears divide institutional investors.

Alphabet’s market value has surged past $4.8 trillion, narrowing the gap with Nvidia to roughly $400 billion. The stock has nearly tripled in the past twelve months, delivering a 150% gain that has left even seasoned investors scrambling to keep up. Yet beneath the headline rally, a quiet tug-of-war is playing out among professional money managers over whether the Google parent can justify its new-era valuation.

Institutional filings released Monday revealed starkly divergent moves. North Star Investment Management boosted its Alphabet stake by 16.8%, bringing its holdings to 36,385 shares worth around $11.4 million. Cannon Capital Management opened an entirely new position of 8,225 shares, valued at roughly $2.58 million and representing 2.3% of its portfolio. Across the aisle, Arbor Capital Management slashed its position by 17.2%, though Alphabet still ranks as its fifth-largest holding.

The split reflects a deeper debate: is Alphabet a mature advertising giant with a promising side bet on cloud, or is it now a full-fledged AI infrastructure powerhouse? The numbers suggest the latter is gaining traction. Google Cloud revenue soared 63% to $20 billion in the first quarter, while the division’s order backlog ballooned to $460 billion, nearly doubling sequentially. Gemini, Alphabet’s enterprise AI platform, now counts eight million paying seats.

First-quarter results provided the raw material for the bull case. Earnings per share came in at $5.11, almost double the consensus estimate of $2.68. Revenue hit $109.9 billion, up 21.8% year over year. The company’s net margin widened to 37.92%, and return on equity approached 39%. Such numbers underpin a capital return program that includes a quarterly dividend raised 5% to $0.22 per share, payable June 15 to holders of record June 8, alongside an ongoing $70 billion buyback.

But the cost of that cloud and AI momentum is escalating fast. Alphabet now expects 2026 capital expenditure to land between $180 billion and $190 billion, up from an earlier forecast of $175-$185 billion. Management has flagged further increases for 2027. The bulk of the spending is earmarked for AI data centers and proprietary tensor processing units, tying up billions long before they translate into incremental profit.

That aggressive outlay has attracted warnings from familiar skeptics. Michael Burry, the investor famous for betting against housing before the 2008 crisis, has drawn parallels to the final stages of the dotcom bubble. Alphabet trades at roughly 28 times forward earnings, well above its ten-year average of 21. The stock’s 200-day moving average now sits 34% below the current price, a gap that historically leaves shares vulnerable to corrections on any disappointment.

The recent pullback suggests some caution. In German trading, the stock hit a high near €337.05 on Friday before closing Monday at €330.10, a 2.88% decline. Over the past 30 days, Alphabet still shows a 22% gain in German-listed shares, and 24.63% in U.S. terms. The short-term dip has done little to alter the overarching momentum, but it has made the valuation more sensitive to earnings misses.

Analysts remain broadly optimistic, with 47 out of 48 covering the stock rating it a buy. DBS Bank lifted its price target to $460, while Goldman Sachs now sees $450. Both cite Alphabet’s “full-stack” control over AI infrastructure—from custom chips to YouTube’s ad platform—as a durable competitive moat.

Investors will get two key updates in the coming weeks. On May 14, YouTube chief Neal Mohan is slated to speak at the MoffettNathanson conference, where generative AI’s impact on video content and competitive pressures are expected to dominate. Then on June 5, Alphabet’s annual shareholder meeting will test management’s ability to balance an unprecedented infrastructure buildout with the capital discipline that dividend seekers demand.