Alphabet shares have continued to draw investor attention after the company was added to the Dow Jones Industrial Average on June 29, replacing Verizon Communications. The move places Google parent Alphabet alongside 29 other blue-chip companies in a widely followed, price-weighted benchmark, while investors weigh whether index inclusion boosts returns—or whether the stock’s performance is more likely to be driven by its accelerating fundamentals in advertising and cloud.
Key takeaways
- Price move: Alphabet closed at $354 per share on June 29 and the article notes the stock would rise to $378 by July 2027 if it matched the historical post-inclusion average.
- Catalyst: Alphabet’s addition to the Dow Jones, replacing Verizon, marked the company’s latest milestone with major index investors.
- Key implication: Historical patterns cited in the report suggest Dow additions have tended to underperform the broader S&P 500 over the following 12 months.
- Fundamental support: The report points to five straight quarters of revenue acceleration, including strong growth in advertising and cloud, tied in part to demand for AI-related products.
What drove the Dow Jones inclusion
The Dow Jones Industrial Average is a price-weighted index of 30 established large-cap companies. Alphabet joined the index on June 29, replacing Verizon Communications. According to the article, Alphabet is only the 16th stock to be added to the Dow in the past 15 years.
The index’s addition criteria were described by S&P Global as typically favoring companies with an “excellent reputation,” demonstrating sustained growth, and being of interest to a large number of investors.
History suggests muted relative performance after Dow additions
While the Dow and the S&P 500 both include large U.S. companies, their construction differs. The article notes that the S&P 500 is weighted by market capitalization, while the Dow is weighted by share price, which can make higher-priced stocks exert more influence on the index’s performance.
Based on the article’s review of the past 15 years, 16 companies have been added to the Dow. The average stock gained 7% during the year following inclusion, while the S&P 500 returned an average of 20% over the same period—suggesting that stocks added to the Dow have historically lagged the broader market over the subsequent 12 months. The article emphasizes that past performance is not a guarantee, but it uses that history to frame expectations for Alphabet.
Using June 29’s closing level of $354 per share as a reference, the article calculates that matching the historical average would imply a move to $378 per share by July 2027. It also notes that the stock’s current trading reference point in the piece is $360, implying about 5% upside from that level under the same historical assumption.
The article further argues that the typical “forced buying” effect seen in major index reconstitutions may be less pronounced for the Dow than for the S&P 500 or Nasdaq Composite because fewer funds track the Dow. That dynamic, it says, can contribute to more muted post-inclusion price appreciation.
Alphabet’s accelerating growth and AI-linked demand
Beyond the index change itself, the article points to improving momentum in Alphabet’s operating results. It says Alphabet’s revenue accelerated for a fifth consecutive quarter in the first quarter, rising 22% to $110 billion. It attributes the acceleration to gains across key areas: advertising revenue increased 15%, and cloud computing revenue increased 64%.
On profitability, the report says GAAP earnings jumped 82%. It attributes that surge to an item related to Alphabet’s investment accounting—specifically an increase driven by unrealized gains in its investment in Space Exploration Technologies.
The article also cites industry demand trends to support the growth outlook. According to Grand View Research, the report says digital ad sales are expected to grow at a 14% annual pace through 2030, while cloud spending is projected to rise 16% annually over the same period. With Alphabet positioned as a large digital advertising provider and a third-largest cloud operator, the article suggests Alphabet could continue to benefit from both tailwinds.
On the AI front, the report emphasizes Alphabet’s hardware and model strategy. It argues that Alphabet is positioned to gain share in AI infrastructure through custom AI accelerators and demand for Gemini models, noting that Gemini is described as the second most popular AI chatbot behind OpenAI’s ChatGPT.
It also states that Alphabet recently decided to sell its AI accelerators—tensor processing units (TPUs)—to customers for use in their own data centers, a change that the article frames as part of how Alphabet monetizes its AI capabilities.
What investors should watch next
With Alphabet now part of the Dow, near-term performance is likely to reflect a combination of index-driven flows and ongoing expectations for advertising and cloud growth. The article points to Wall Street estimates for earnings growth of 15% annually over the next three years and describes the current valuation as aligning with that outlook. Investors are likely to focus next on upcoming earnings updates, whether revenue acceleration persists in advertising and cloud, and any additional signals on AI monetization as the market gauges both execution and demand.
