The AI Trade Is Confirmed—Are You Positioned to Take Advantage?
The past week's earnings season was at full throttle, with five of the Magnificent Seven reporting between Wednesday and Thursday. Meta Platforms (META), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Apple (AAPL) make up nearly a quarter of the S&P 500 so, when they move, the broader market generally moves with them. This past week, they drove it higher.
Within that strength, Alphabet stood out, jumped 9% after posting strong results and upbeat guidance. For readers of the MEM Edge Report, this was familiar territory; we added Alphabet to our Suggested Holdings List in mid-April, noting that the stock was setting up for a potential move higher.
Before earnings, the pieces were already coming together. Analyst upgrades had started to roll in, driven by growing confidence in the Alphabet’s custom AI chips and its long-term partnership with Broadcom. At the same time, an expanded collaboration with GitLab underscored Google Cloud’s push to speed up AI-driven software development. The groundwork was being laid well before earnings confirmed it.
Why Alphabet Won the Week
Alphabet’s Q1 2026 results showed that revenue grew 22% year over year, marking the company’s strongest quarterly growth since 2022. More importantly, Google Cloud, the core of Alphabet’s AI strategy, delivered $20 billion in revenue, up 63%, with backlog nearly doubling. This is evidence of accelerating demand.
The news showed that enterprise AI spending isn’t peaking, but is still in its early stages.
The Setup: OpenAI’s Shadow
The strength of Wednesday’s reaction came on the heels of Tuesday’s report that OpenAI had missed internal targets for revenue and user growth. The news sent AI-related stocks lower and raised questions about whether expectations had gotten ahead of reality.
Alphabet’s report provided a decisive counterpoint. The scale of its cloud growth and backlog made clear that enterprise demand for AI infrastructure is accelerating. The issue highlighted by OpenAI was not the viability of AI spending, but the competitive dynamics within it.
What This Means for AI Stocks
The broader message from this earnings week extends beyond any single company. AI is not a uniform tide lifting all participants equally, but a competitive landscape where execution and positioning matter.
Alphabet’s results answered the more important question: Is AI translating into real, scalable, enterprise revenue growth? As of Wednesday night, the answer is clearly yes. With $20 billion in cloud revenue, 63% growth, a rapidly expanding backlog, and demand that continues to outpace supply, the foundation for AI infrastructure investment remains intact heading into the second quarter.
For those who followed our mid-April addition of Alphabet, this week marked the payoff. The proprietary chip advantage, the Broadcom partnership, and the momentum within its AI ecosystem all came together in a single report.
For those looking to stay aligned with the next wave of emerging AI leaders, you can start a free 2-week trial of my twice-weekly MEM Edge Report here.
Warmly,
Mary Ellen McGonagle
MEM Investment Research
