Alphabet rises 4.1% as it begins trading in the Dow

Alphabet Inc. shares climbed 4.1% on Monday as the Google parent started trading in the Dow Jones Industrial Average, replacing Verizon. The rise came with a broader rebound in technology stocks and reports that Google limited Meta’s access to its Gemini artificial intelligence models because demand exceeded available computing capacity.

Inclusion in the 30-stock, price-weighted Dow began Monday and is a notable change for Alphabet. Analysts expect the index’s price-weighted structure will not produce the same passive inflows that typically follow additions to market-cap-weighted benchmarks. The wider tech sector moved higher after a sharp selloff last week: an ETF tracking major tech names reversed recent losses, while Meta Platforms, Amazon and Tesla each rose more than 2%; Nvidia and Microsoft gained over 1%; Apple ticked up about 0.1%.

Google informed Meta around March that it could not supply the full Gemini capacity Meta sought. The limits remain in place and have delayed some of Meta’s internal AI projects. Meta has asked employees to use AI tokens more efficiently. Other Google customers have seen reduced capacity to a lesser extent; Meta’s demand for Google’s models has been unusually high.

The capacity constraints reflect pressure on compute resources across the AI industry, where demand for advanced models has at times outpaced available chips, data center space and power. Google is expanding its infrastructure and reached an agreement to lease additional computing resources from SpaceX at about $920 million per month.

On Alphabet’s first-quarter earnings call in April, Chief Executive Sundar Pichai acknowledged the limits on computing capacity, saying, “Obviously, we are compute-constrained in the near term,” and noting cloud revenue would have been higher if demand could have been met. Alphabet reported 63% revenue growth in its cloud business for the quarter, the strongest since it began disclosing cloud figures in 2019. Cloud revenue topped $20 billion for the first time, and the backlog of signed but undelivered cloud contracts nearly doubled quarter over quarter to more than $460 billion.

Technical indicators on Alphabet’s stock were mixed. The shares have risen about 96% over the past 12 months and traded roughly 11% above the 200-day simple moving average of $314.41. Short-term measures were weaker: the stock was about 2% below the 20-day simple moving average of $359.34 and 4.9% under the 50-day average of $369.57. The 20-day average remained below the 50-day average.