On Thursday, Alphabet’s share price rose nearly 10 per cent after the company reported first-quarter revenue of $109.9 billion, a 22 per cent increase year over year that beat analyst estimates by almost $3 billion. Google Cloud crossed $20 billion in quarterly revenue for the first time, growing 63 per cent. The cloud backlog nearly doubled quarter on quarter to more than $460 billion. Earnings per share surged 81 per cent. Search queries hit an all-time high. The stock closed at $381.94, pushing Alphabet’s market capitalisation above $4.6 trillion. Nvidia, which closed the same day at $198.61 with a market capitalisation of approximately $4.8 trillion, had fallen more than 6 per cent over the previous two sessions after the Wall Street Journal reported that OpenAI missed its internal targets for weekly active users and monthly revenue.

The gap between the two companies is now roughly $200 billion. Options traders are assigning approximately a 53 per cent probability that Alphabet will touch $5 trillion before 15 May. If it does, and Nvidia does not rally into or beyond its earnings report on 20 May, Alphabet will become the most valuable company in the world. The last time it held that title was February 2016, when it briefly overtook Apple for two days.

The earnings

The numbers that moved the market were not just large but structurally different from what Alphabet reported a year ago. Google Cloud’s 63 per cent growth rate accelerated from 48 per cent in the prior quarter, making it the fastest-growing division among the three major cloud platforms. AWS grew 17 per cent. Microsoft Azure grew 33 per cent. Google is still third in market share, but it is growing at nearly twice Azure’s rate and almost four times AWS’s. Sundar Pichai told analysts on the earnings call that the company was compute-constrained in the near term and that cloud revenue would have been higher if capacity had kept pace with demand. Revenue from products built on generative AI models grew nearly 800 per cent year over year. YouTube advertising reached $9.9 billion, up 11 per cent, and Alphabet now has 350 million paid subscriptions across YouTube Premium, YouTube Music, and Google One.

The 💜 of EU tech

The latest rumblings from the EU tech scene, a story from our wise ol’ founder Boris, and some questionable AI art. It’s free, every week, in your inbox. Sign up now!

The capital expenditure guidance tells the other half of the story. Alphabet raised its full-year 2026 capex estimate to between $180 billion and $190 billion, up from the $175 billion to $185 billion range it had guided in February. The combined 2026 capex commitment across the five major hyperscalers is now on track to exceed $650 billion, a figure larger than the GDP of most European countries. Alphabet is spending aggressively because Google Cloud’s growth rate suggests that the returns on AI infrastructure investment are materialising faster than the market expected. The $460 billion backlog is not revenue. It is a pipeline of contracted demand that will convert to revenue over multiple years. But its existence means that Alphabet’s cloud business is not speculative. The customers have already committed.

The divergence

Nvidia’s stumble was not about its own fundamentals. The company reported $68.1 billion in revenue for its most recent quarter, with data centre revenue up 75 per cent. Its earnings report on 20 May is expected to show revenue of approximately $78 billion, up 78 per cent year over year. The company remains the dominant supplier of the GPUs that power every major AI training and inference workload in the world. What changed this week was the narrative around Nvidia’s largest customers. OpenAI’s $852 billion valuation has been under scrutiny since the company’s growth metrics stopped accelerating at the pace investors expected, and the report that it missed internal revenue and user targets hit Nvidia because the market read it as a signal that the demand for AI chips might not be bottomless. AMD fell 6 per cent. Arm dropped 8 per cent. Broadcom slid 5 per cent. The entire semiconductor complex sold off on the implication that the largest buyer of AI chips is not growing as fast as its valuation requires.

The divergence between Alphabet and Nvidia reflects a deeper question about where value accrues in the AI economy. Nvidia sells the shovels. Alphabet uses the shovels to build the mine and then sells what the mine produces. Google Cloud’s $20 billion quarter was generated by selling AI infrastructure and services to enterprises. Google Search’s record query volume was driven by AI Overviews, the feature that uses generative models to answer questions directly on the search page. YouTube’s advertising revenue benefits from AI-driven recommendation and content moderation. Alphabet is not just buying AI chips. It is converting those chips into revenue across three distinct business lines, each of which independently generates more quarterly revenue than most technology companies produce in a year.

The infrastructure layer

The market is beginning to price a distinction that has been building for two years: the difference between companies that supply AI infrastructure and companies that deploy it. Nvidia’s valuation depends on the assumption that AI chip spending will continue to accelerate. Alphabet’s valuation depends on the assumption that AI chip spending will generate returns. Both assumptions can be true simultaneously, but they carry different risk profiles. If AI spending slows, Nvidia’s revenue growth decelerates. If AI spending continues but the returns materialise primarily at the application layer, Alphabet captures a disproportionate share of the value because it operates the applications.

US utilities are planning to spend $1.4 trillion by 2030 to power the AI data centre buildout, and the hyperscalers’ $650 billion in 2026 capex is flowing into GPU clusters, custom silicon, fibre optic networks, and cooling systems that will take years to fully depreciate. The question is who earns the return on that capital. Nvidia earns its return at the point of sale. Alphabet earns its return over the lifetime of the infrastructure, as cloud customers consume compute, as search users generate advertising revenue, and as YouTube viewers drive subscription and ad income. The compounding nature of Alphabet’s revenue model is what the market repriced on Thursday. A 10 per cent move in a $4.6 trillion company is not a reaction to a single quarter. It is a reassessment of the long-term earnings power of the platform that sits on top of the chips.

The ranking

The Magnificent Seven, the group of technology companies that has dominated US equity returns since 2023, is reshuffling. Alphabet dropped from second to as low as fifth in the group’s internal ranking during 2025, weighed down by concerns that AI would cannibalise Google Search and that antitrust litigation would force structural changes to the company. Both concerns remain active. The Department of Justice’s antitrust case against Google’s search monopoly is ongoing, and the long-term impact of AI on search advertising is genuinely uncertain. But the first-quarter results showed that AI is not cannibalising search. It is accelerating it. Queries are at an all-time high because AI Overviews make the search experience more useful, not less. Users are asking more questions, not fewer, and each question generates an advertising opportunity.

Pichai opened Google Cloud Next 2026 by announcing a $240 billion backlog and 750 million Gemini users, framing the company’s AI strategy as the integration of model, runtime, silicon, and distribution into a single platform. The Gemini Enterprise Agent Platform, the A2A protocol for inter-agent communication, and the $750 million partner fund for agentic AI deployments are all designed to make Google Cloud the default infrastructure for the next generation of enterprise AI applications. If that strategy succeeds, the cloud business alone could be worth more than most standalone technology companies within two years.

Nvidia reports on 20 May. If it beats expectations convincingly, the gap may widen again and the overtaking may not happen this month. But the structural shift that Thursday’s trading revealed is not about one quarter. The narrative that AI will destroy traditional software businesses has been overstated, and what Alphabet’s results show is that the companies best positioned to profit from AI are not the ones selling the technology but the ones deploying it at scale across existing distribution channels with existing customer relationships. Nvidia built the engine. Alphabet is building the car, the road, and the toll booth. The market is starting to price accordingly.