Catenaa, Thursday, August 27, 2026- Alphabet stock has erased $692 billion in market value since hitting an all-time high on May 13, making it the second-biggest point drag on the S&P 500.
Alphabet shares hit an all-time high on May 13 after soaring more than 150% in the previous 12 months, putting them among the 25 best performers in the S&P 500 Index over that stretch and far outpacing the other Magnificent Seven technology giants.
But the momentum has reversed since then due to questions about a brain drain at Google’s parent and fears that the company is losing its edge in AI.
At the crux of the selloff is Alphabet’s suddenly shaky standing in the AI race, with its heavy spending on building out the infrastructure to develop the technology and the delayed release of its new Gemini AI model weighing on investor sentiment.
A few months ago, Google lost two top employees to Anthropic PBC and OpenAI. Earlier this month, Jeff Dean, who was key to Google’s AI strategy, departed to launch a startup and took several high-profile coworkers with him. And Demis Hassabis stepped down as chief executive officer of the Google DeepMind AI research lab, accepting a new role as chairman.
Those moves sent Alphabet shares tumbling 4% on August 5, erasing $186 billion in market value in a single session.
Of course, Alphabet is hardly the only firm challenged by Big Tech’s talent race.
Last year, Meta Platforms poached Ruoming Pang from Apple Inc., where he ran the iPhone maker’s AI models team, with a $200 million multi-year compensation package and then brought in a couple of his senior deputies.
Around that time, OpenAI Chief Executive Sam Altman complained that Meta was offering his employees signing bonuses of as much as $100 million to join its top AI team.
Meanwhile, OpenAI has lured more than 400 Apple employees with rich salaries and hefty stock option offers. And Apple has sued OpenAI for stealing trade secrets.
At Alphabet, however, turnover questions are just the tip of the iceberg. Its more immediate concerns surround delays in developing its most powerful AI model, Gemini 3.5 Pro, which is behind schedule as the company works on improvements, particularly with its coding capabilities, an area where Alphabet is already seen as lagging Anthropic and OpenAI.
Two weeks ago, Google released a new Gemini 3.7 Flash model but gave no update on the timetable for Gemini 3.5 Pro.
“Our AI momentum and shipping velocity are at an all-time high. We’re rolling out model updates within weeks of each other, with Gemini 3.7 Flash becoming our fastest-growing model to date and Gemma surpassing one billion downloads,” a Google spokesperson said.
The optimism for Alphabet’s AI business stems from the success of its tensor processing unit, or TPU, chips and the overwhelming amount of computing power it has amassed. But it’s also facing skepticism about its spending after raising $25 billion in an early August bond offering featuring generous yield payouts.
Alphabet has company there, as investors increasingly press the biggest AI developers for proof of returns on their spending to build out AI data centers.
The tech-heavy Nasdaq 100 Index hasn’t reached a new high since May. In the backdrop are macroeconomic fears from the war in the Middle East, the US trade war with Canada, and the threat of higher interest rates amid stubborn inflation.
At least part of the rotation away from Alphabet shares is just the normal market churn. For example, Microsoft has surged more than 25% since the end of July, when its earnings report showed the fastest cloud growth in four years.
Alphabet, on the flip side, sold off after its earnings in late July as investors balked at its heavy capital expenditures and negative free cash flow.
