Alphabet Edges Higher as Investors Weigh AI Hardware Push and Search Shift
Alphabet shares edged higher overnight amid a sector rotation away from Nvidia. Meanwhile, the company is advancing custom AI chips while managing monetization shifts in search.
Alphabet Inc. shares rose 0.26% in overnight trading as retail investors discussed moving funds into established tech companies following an overnight drop in Nvidia stock. The shift came alongside reports that Nvidia's board is seeking to replace its chief executive, sparking interest in alternative large-cap technology firms.
The move follows Alphabet's recent launch of two additions to its eighth-generation Tensor Processing Units, the TPU 8tx and TPU 8i Max. Unveiled on November 9 and scheduled for release in 2027, the specialized chips aim to process complex artificial intelligence tasks at lower operating costs. Industry projections from Bloomberg Intelligence suggest that Alphabet's TPU-related revenue could climb from $12 billion in 2026 to over $135 billion by 2028, aided by client interest from companies such as Apple, Meta Platforms, and Oracle.
Despite progress in hardware, Alphabet faces challenges adapting its core advertising business to new search habits. The company noted in October 2026 that overall query growth hit five-year highs, but ad revenue growth experienced a slowdown. Executives attributed part of that drag to its conversational AI Mode, which currently generates less advertising income than standard results.
Changing behavior around AI summaries is also altering user traffic. One study found that searchers visited standard site links in just 8% of sessions where artificial intelligence overviews were shown, compared with 15% when no summary was present. In addition, massive capital spending on data centers, power, and chips caused free cash flow to turn negative in the second and third quarters of 2026, with the company opting to sell bonds and issue stock instead of repurchasing shares.
Even with rising infrastructure costs, analysts remain largely constructive on the company. Wall Street consensus tracked by TipRanks shows a Strong Buy rating, with an average 12-month target of $398.30 among 34 analysts, while high and low targets stand at $490 and $300, respectively.