Google's corporate parent joins $4 trillion club as investors continue to bet on AI breakthroughs

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Google parent Alphabet Inc. on Monday became the fourth Big Tech powerhouse to be valued at $4 trillion, a once seemingly unfathomable milestone that's become more like a rite of passage amid an artificial intelligence arms race.

Alphabet reached the threshold just four months after Google dodged the U.S. government's attempt to break up its internet empire following a ruling last year that branded its ubiquitous search engine an illegal monopoly.

In an effort to prevent further abuses, a federal judge overseeing the case ordered a shake-up that investors widely interpreted as a slap on the wrist, resulting in a 57% increase in Alphabet's stock price since then that has created an additional $1.4 trillion in shareholder wealth.

The rapid run-up thrust Alphabet into a $4 trillion club that has previously welcomed computer chipmaker Nvidia, which became the first to cross the barrier in July. Both Apple and Microsoft also surpassed market values of $4 trillion last year, but they have fallen back mid worries that the spending spree on AI will turn into a bubble that bursts.

Nvidia's market value briefly topped $5 trillion in late October, before backtracking as the AI bubble fears also exacted a toll on its stock price because its chipsets are needed to power the technology.

Meanwhile, Amazon is currently valued at $2.6 trillion, in part because of its AI ambitions, and Facebook parent Meta Platforms is valued at $1.6 trillion for some of the same reasons. Electric automaker Tesla also is betting heavily on AI, a gambit that prompted the company — now valued at $1.5 trillion — to approve a compensation package t hat would pay CEO Elon Musk $1 trillion if several targets are hit, including reaching a market value of more than $8.5 trillion.

Alphabet joined the $4 trillion club on the same day that Apple announced it will rely on Google’s AI technology to help smarten up its virtual assistant Siri after coming up short in its own efforts to bring more advanced features to the iPhone.

Google is well positioned to become one of the big winners in the AI battle because it is deploying the technology to transform its search engine into more of a conversational answer engine to compete against the likes of OpenAI's ChatGPT and Perplexity.

The next generation of the Gemini model underlying Google's AI technology has been winning rave reviews since its recent release, helping to drive up Alphabet's stock price while the shares of other AI-driven companies have dipped with ongoing bubble worries. Google's Cloud division that sells AI tools to corporate customers and government agencies has emerged as Alphabet's fastest growing segment during the past three years while AI technology has enabled its Waymo robotaxi division to dispatch more self-driving vehicles in cities across the U.S.

The competitive threats posed by rising AI stars such as OpenAI and Perplexity is one of the reasons that U.S. District Judge Amit Mehta rebuffed the U.S. Justice Department's proposal to force Google to sell its industry-leading Chrome web browser. The judge reasoned the technological advances unleashed by AI already have been forcing significant changes in online search.

Alphabet's market value could plunge if investor sentiment about the company's exposure to a potential AI bubble suddenly shift. Even Alphabet CEO Sundar Pichai conceded that some market “irrationality” is contributing to the skyrocketing market values of Big Tech companies during a November interview with the BBC.

“I think no company is going to be immune, including us,” Pichai said if the AI-driven euphoria suddenly evaporates.