Google Surges Ahead in AI Race, Overtaking OpenAI
Staff Reporter
05 February 2026, 17:02
Alphabet is no longer seen as trailing in artificial intelligence. The Google parent has moved to the front of the race. Wall Street now views the company as a leader, not a follower.
The change marks a sharp reversal from a year ago. At the time, investors believed Google was falling behind OpenAI. Alphabet’s stock suffered as doubts grew about its AI strategy.
That skepticism has faded. On Wednesday, Alphabet executives spoke with confidence on the company’s post-earnings call. It was their first since the release of Gemini 3, Google’s latest AI model.
The tone was deliberate. Executives emphasized that AI investments are paying off across the business. Growth is no longer limited to cloud services alone.
“Overall, we’re seeing our AI investments and infrastructure drive revenue and growth across the board,” said Sundar Pichai, Alphabet’s chief executive.
That momentum is driving spending plans. Alphabet said it may double capital expenditures in 2026. The company forecast spending between $175 billion and $185 billion. Most of it will fund AI computing capacity.
The projection initially rattled investors. Alphabet shares fell as much as 6 percent in after-hours trading. The reaction did not last.
Strong earnings changed the mood. Google Cloud revenue rose 48 percent in the December quarter. The results exceeded Wall Street estimates and reinforced confidence in Alphabet’s strategy.
The stock recovered its losses. It ended after-hours trading flat. The move sent a clear message. AI spending is acceptable if returns are visible.
User growth supports that view. The Google Gemini app reached more than 750 million monthly active users by the end of December. That was up from 650 million in the prior quarter.
Engagement has also increased. Pichai said usage rose sharply after the launch of Gemini 3. The app competes directly with OpenAI’s ChatGPT.
ChatGPT remains larger by some measures. OpenAI chief executive Sam Altman said in October that ChatGPT had surpassed 800 million weekly active users. Still, Google is closing the gap.
Gemini 3 now plays a central role at Google. It powers “AI Mode” in search. It also underpins Google’s enterprise AI products.
Those products are gaining traction. Alphabet said its enterprise Gemini offerings now have eight million paying licenses. Adoption among corporate customers continues to rise.
The broader market has taken notice. Since early last year, Alphabet has moved from laggard to leader among the “Magnificent Seven” tech companies. Only Nvidia and Apple now match its scale. All three exceed $4 trillion in market value.
The contrast with rivals is growing sharper. Microsoft shares fell more than 20 percent since October. Investors have raised concerns about its reliance on OpenAI.
Oracle has faced similar pressure. Its shares are down about 49 percent since early October. Much of its contract backlog is tied to OpenAI.
Alphabet has moved in the opposite direction. Its shares are up about 36 percent over the same period. Analysts cite its balance sheet and diversified AI strategy.
“There’s a narrative emerging where the market is favoring Google versus OpenAI,” said Paul Meeks, head of tech research at Freedom Capital Markets. He called Alphabet’s spending plans “eye-watering.” Still, he said investors trust Google’s ability to fund them.
Others point to OpenAI’s financial risks. The company continues to lose money while signing multi-billion-dollar deals. That has raised concerns about future fundraising.
“The deals that OpenAI has with Microsoft and Oracle are highly tied to their ability to raise future funds,” said Dan Morgan, a portfolio manager at Synovus Trust.
For now, Alphabet holds the advantage. Investors are rewarding scale, cash flow, and measurable returns. Google’s AI push is beginning to deliver all three.
