Alphabet Secures Best Annual Performance Since 2009 as AI Strategy Silences Skeptics
Mountain View, Thursday, 1 January 2026.
Defying antitrust fears, Alphabet stock surged 65% in 2025—its best run since 2009—as its Gemini AI successfully eroded ChatGPT’s market dominance.
A Resurgent Market Leader
Alphabet Inc. (GOOGL) closed the trading year on December 31, 2025, at a price of $313.00, securing a market capitalization of $3.78 trillion [4][6]. This valuation marks a dramatic turnaround for the tech giant, which faced intense scrutiny regarding its artificial intelligence capabilities earlier in the year. While shares hit a low point in April 2025, the company rallied to finish the year up 65%, significantly outpacing rival Microsoft, which posted a gain of approximately 16% over the same period [1][3]. This divergence in performance underscores a shift in investor sentiment, driven largely by Alphabet’s ability to execute on its AI product roadmap under CEO Sundar Pichai [1].
Winning the Generative AI Market Share
The primary catalyst for this resurgence has been the tangible success of the Gemini artificial intelligence platform. Throughout 2025, Alphabet aggressively reclaimed ground in the generative AI sector. Data from Similarweb indicates a significant shift in user engagement: while ChatGPT’s share of generative AI traffic declined from 87% to 68%, Gemini’s share more than tripled, jumping from 5% to 18% [1]. This momentum was bolstered by the August 2025 launch of the Gemini Nano Banana image generator, which surpassed 5 billion images generated by late September and overtook ChatGPT in Apple’s App Store rankings [1]. Furthermore, in November 2025, the company announced Gemini 3, an upgraded model designed to sustain this engagement growth [1].
Cloud Growth and Infrastructure Dominance
Beyond consumer applications, Alphabet’s infrastructure investments have begun to yield substantial financial returns. In the final quarter of 2025, Google Cloud revenue surged 34%, with segment operating income rising by an impressive 84% [3]. This growth is partly fueled by the company’s long-term investment in custom silicon; Anthropic, a major player in the AI space, has placed large orders for Alphabet’s Tensor Processing Units (TPUs) [3]. To support this demand, Alphabet raised its capital spending forecast for 2025 to as high as $93B, with analysts expecting this figure to climb to over $114 billion in 2026 [1].
Regulatory Clarity and Valuation Shifts
Investor confidence was further restored by favorable legal developments and a re-rating of the stock’s valuation. In September 2025, U.S. District Judge Amit Mehta ruled against imposing severe consequences in the company’s antitrust case, allowing Google to continue its default search engine agreement with Apple while requiring data sharing with competitors [1]. This removed a significant overhang for the stock, which had been trading at less than 14 times forward earnings in April 2025 [5]. By December 30, 2025, the stock’s valuation had expanded to approximately 30 times forward earnings [5]. Institutional confidence followed suit, with Berkshire Hathaway purchasing $4 billion worth of shares in the third quarter of 2025 [6].