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Alphabet Stock Doubled in a Year. Is There Still Upside?

Alphabet’s stock has doubled in the past year and just joined the Dow. But massive AI spending and lofty valuations are fueling a debate over whether the rally can continue.

OurAlpha

05 Jul 2026 — 4 min read

Alphabet’s stock has doubled in a year, driven by AI and ad growth, but valuation concerns are rising.

Alphabet (GOOGL) has doubled over the past year, but a debate is heating up over its valuation and the returns on its AI investments. As of the close on July 2, 2026, the stock sat at $359.91, down 0.36% from the prior session. Markets were closed over the holiday weekend, so there’s no real-time trade data. Here’s a rundown of the key events and market takes.

Alphabet officially joined the Dow Jones Industrial Average on June 29, 2026, replacing Verizon as the index’s new communication services representative.^[MediaPost]
In Q1 2026, Alphabet reported EPS of $5.11, crushing the consensus estimate of $2.63 by 94.10%.^{[24/7 Wall St.]}
Google Cloud revenue surged 63% YoY to $20.03 billion, with backlog nearly doubling to over $460 billion.^{[24/7 Wall St.]}
The company guided 2026 capex at $180 billion to $190 billion, mostly for AI infrastructure, sending free cash flow down 46.63% YoY.^{[24/7 Wall St.]}
As of July 1, 2026, Alphabet shares were up 14.2% year-to-date and more than 100% over the past 12 months.^{[24/7 Wall St.]}
Broad market valuations are stretched: the S&P 500’s Shiller CAPE ratio hit 41.72 at the end of June, just 3.5% below its dot-com bubble peak.^{[The Motley Fool]}

Alphabet (GOOGL) has more than doubled over the past year, and on June 29, 2026, it officially joined the Dow Jones Industrial Average, replacing Verizon, a member since 1984.^[^MediaPost^] The move is widely seen as a nod to the growing economic weight of AI and digital advertising. But with the stock at all-time highs, the debate over whether the valuation is justified — and whether the massive AI spending will pay off — is getting louder. As of the close on Thursday, July 2, 2026, Alphabet (GOOGL) was at $359.91, down 0.36% from the prior close of $361.21. U.S. markets were closed for the July 4 holiday and the weekend, so that print is the last available trade.

Joining the Dow: AI and Advertising as Economic Bedrock

S&P Global announced on June 23, 2026, that Alphabet would replace Verizon in the Dow, effective June 29.^[^MediaPost^] In its press release, S&P Global said: “Adding Alphabet will broaden and strengthen the Dow’s exposure to these dynamic sectors of the U.S. economy. Its larger market cap and stock price, along with the breadth of its business, make it a more representative communication services component for the index.”^[^MediaPost^] MediaPost’s analysis noted the move “validates that advertising and artificial intelligence are seen as the bedrock of commerce.”^[^MediaPost^]

That said, because the Dow is price-weighted, Alphabet’s influence on the index may be limited. The Wall Street Journal noted that under the Dow’s methodology, stocks with higher prices carry more weight. Alphabet will account for roughly 4% of the index, while Goldman Sachs and Caterpillar each have weights above 10%. If the Dow were market-cap-weighted like the S&P 500, Alphabet would rank in the top three.^[^MediaPost^]

Strong Results: Cloud and AI Demand Fuel Growth

Alphabet’s Q1 2026 financials were impressive. According to 24/7 Wall St., EPS came in at $5.11, well above the consensus estimate of $2.63 — a beat of 94.10%.^[^{24/7 Wall St.}^] Operating profit rose 29.70% YoY, and the operating margin expanded to 36.1%.^[^{24/7 Wall St.}^]

The main driver was Google Cloud. Revenue jumped 63% YoY to $20.03 billion, and its backlog nearly doubled sequentially to over $460 billion.^[^{24/7 Wall St.}^] Meanwhile, the Gemini AI model’s API throughput hit 16 billion tokens per minute, up 60% from the prior quarter.^[^{24/7 Wall St.}^] Paid subscribers reached 350 million, and the company raised its quarterly dividend by 5% to $0.22 per share.^[^{24/7 Wall St.}^]

Capex and Valuation: The Bet Behind the Numbers

Those strong results come with a massive price tag. Alphabet guided 2026 capex at $180 billion to $190 billion, mostly for AI infrastructure.^[^{24/7 Wall St.}^] That sent free cash flow down 46.63% YoY.^[^{24/7 Wall St.}^] CFO Anat Ashkenazi explained: “We are seeing unprecedented internal and external demand for AI compute resources.”^[^{24/7 Wall St.}^]

This “profits for growth” trade-off is fueling concerns about valuation and return on investment. Meanwhile, the broader market is also looking stretched. According to The Motley Fool, the S&P 500’s Shiller CAPE ratio hit 41.72 at the end of June — roughly 140% above its 155-year average of about 17.4, and just 3.5% below its dot-com bubble peak.^[^{The Motley Fool}^] Warren Buffett has called the CAPE ratio “probably the best single measure of where valuations stand at any given moment,” and has warned that when it approaches 200%, investors are “playing with fire.”^[^{The Motley Fool}^] The current reading has now surpassed 233%, a new all-time high.^[^{The Motley Fool}^]

Market Sentiment: Optimism and Fear Side by Side

Despite strong earnings from Alphabet and other tech giants, market sentiment is mixed. The AAII’s June 2026 survey showed about 45% of U.S. investors are bullish on the next six months, 36% are bearish, and 19% are neutral.^[^{The Motley Fool}^] Yet CNN’s Fear & Greed Index spent most of June in “fear” territory.^[^{The Motley Fool}^] Warren Buffett also sounded a cautionary note in a CNBC interview at this year’s Berkshire Hathaway annual meeting, saying, “We have never seen people more eager to gamble than they are right now,” suggesting investors are piling into unnecessary short-term risk.^[^{The Motley Fool}^]