Why Alphabet Rallied Today

Shares of Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) rallied as much as 3.3% on Wednesday, before settling into a 2.4% gain as of 3:11 p.m. EDT.

While not a tremendous move, the gain is notable since Alphabet's stock had already been riding high after a 65% gain in 2025 and another 5% gain in early 2026.

Today's move may have been sparked not only by the rolling back of tensions between the Trump Administration and NATO over Greenland, which led to a sell-off yesterday, but also by comments made by Google DeepMind founder Demis Hassabis yesterday at the Davos World Economic Forum regarding Google's newfound competitiveness in the artificial intelligence race.

10 times the speed of the industrial revolution, with best-in-class models

While today's move likely can't be pinned down to any particular comment, Hassabis made several notable observations yesterday that likely added up to increased enthusiasm for Alphabet's stock today.

In an interview with Bloomberg TV at Davos, Hassabis noted that Google's models are "back to state of the art" following the November rollout of Gemini 3 and its Nano Banana image-generation model. Hassabis also noted that Alphabet's unique ownership of the "full stack" of AI capabilities and ready-made markets puts it in a strong strategic position to continue this lead.

What Hassabis is referring to here is Alphabet's unique combination of leading research labs that invented many of the core technologies used by all AI companies today, such as transformer technology, along with products that can use AI immediately, such as Search, email, video, self-driving cars, and others. In addition to leading research and distribution capabilities, Alphabet's ability to design its own chips and build its own data centers is a huge cost advantage. As a result, Hassabis said, "structurally, from first principles, we should be doing very well, and there's a lot more headroom to come from here."

Alphabet certainly has advantages over OpenAI in this regard, which still rents high-priced Nvidia (NASDAQ: NVDA) GPUs from cloud computing companies, adding cost inefficiencies relative to Alphabet. That can work if OpenAI maintains a lead in its AI models, but Gemini 3's introduction two months ago seems to have erased that lead, at least for now. On that note, Hassabis also made a comment to Sources news that Alphabet has no plans to insert advertising into Gemini, while also delivering a shot at OpenAI's recent implementation of ads into ChatGPT. Hassabis said, "It's interesting they've gone for that so early... Maybe they feel they need to make more revenue."

Image source: Getty Images.

How much "headroom" can there be?

Just how much "headroom," or upside, could there be for Alphabet, per Hassabis? Later in the Bloomberg interview, Hassabis noted he believes the AI revolution will be "10 times bigger and 10 times faster than the industrial revolution."

If the AI revolution's scope is as large as Hassabis anticipates, and if Alphabet can retain its new competitive edge, last year's stock market gains may be just the beginning of this rally. While Alphabet's stock has outperformed, a 32 P/E ratio isn't expensive for the new artificial intelligence leader.

Billy Duberstein and/or his clients have positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has a disclosure policy.