By Christine Ji
The Google parent company is on track to finish with a market capitalization ahead of Microsoft's for the first time since 2018
Microsoft has made moves in AI, but one analyst worries that it's costing the company a lot of money to drive value for investors.
Microsoft Corp. is on track to surrender its position as the third-largest U.S. company thanks to Alphabet Inc.'s fresh shine in the eyes of investors.
Given Alphabet's (GOOG) (GOOGL) intraday market capitalization of $3.637 trillion, the company is on pace to edge out Microsoft (MSFT), which has a $3.620 trillion intraday valuation, according to Dow Jones Market Data.
If the trend holds through the close, it would mark the first time since 2018 that the Google parent company has held a larger market capitalization, according to Dow Jones Market Data. The last time Alphabet held the position of the third-largest company in the U.S. was April 2024, before it was surpassed by Nvidia Corp. (NVDA).
Currently, Nvidia and Apple (AAPL) are the top two U.S. companies by market cap.
Also read: Amazon and Microsoft's stocks could be in trouble due to AI's destructive economics
The shake-up among the &#34;Magnificent Seven&#34; rankings points to the escalating competition in the artificial-intelligence landscape. Big Tech companies have scrambled to build out their cloud-computing businesses and lock in key AI partnerships.
Alphabet's moves in AI have been well received, helping to lift its stock 60% on the year - a &#34;Magnificent Seven&#34;-leading performance - including a 2.5% gain in Thursday's session. The company on Thursday said it was launching Nano Banana Pro, a more advanced image-generation tool that leverages the company's newest Gemini AI model.
Google has been creating an integrated ecosystem to build and distribute AI offerings, from custom tensor-processing units to its own proprietary large language model. Google's Gemini 3 launch on Tuesday showed investors that it's quickly catching up to OpenAI, as Google's newest model outperformed the latest version of ChatGPT on several key reasoning and intelligence measures.
Google has also been expanding into the enterprise space with the launch of Gemini Enterprise in October. That's an agentic platform designed to integrate AI into corporate workflows. Gemini 3 features advanced agentic coding abilities with its new Antigravity platform and increased reasoning abilities for business purposes.
Microsoft has made strategic moves to boost its position in the AI race. It currently has a 27% stake in OpenAI after the AI-model provider's transition to a for-profit business. Earlier this week, Microsoft announced a new strategic partnership with Nvidia and Anthropic, under which Microsoft will invest up to $5 billion and sell $30 billion of Azure computing capacity to the AI company.
Read: Microsoft, Nvidia and Anthropic ink $45 billion deal that furthers a big critique of the AI trade
The deal diversifies Microsoft's customer base and adds Anthropic's Claude model to its enterprise AI offerings, HSBC analyst Stephen Bersey wrote in a Wednesday note. Additionally, Microsoft still retains commercial and product-level relationships with OpenAI.
Microsoft's existing corporate presence and relationship with OpenAI make it well-positioned to take advantage of the enterprise-AI market, as &#34;it has ample in-context data, cloud infrastructure, AI models and AI fabric in order to orchestrate a complex AI agentic ecosystem,&#34; Bersey said. He has a buy rating and a price target of $667 on Microsoft's stock.
Even though AI has boosted Microsoft's Azure business, Rothschild &amp; Co Redburn analyst Alex Haissl pointed out in a Tuesday note that these AI revenues require six times the amount of capital investment to yield the same level of value compared with traditional cloud revenues. Additionally, Haissl warned of Microsoft's partnerships with OpenAI and Anthropic causing &#34;value leakage&#34; from its Office suite as users spend more time on third-party models. Haissl downgraded Microsoft's stock to neutral from buy and lowered his price target to $500 from $560.
Read: Alphabet's stunning stock surge this year could fuel this never-before-seen feat
-Christine Ji
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
11-20-25 1140ET

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<p>Alphabet Inc. is poised to surpass Microsoft Corp. in market capitalization for the first time since 2018, driven by its advancements in AI and a 60% stock increase this year. Alphabet's new AI tools and strategic moves have bolstered investor confidence, while Microsoft's costly AI investments and partnerships have raised concerns about value leakage. Analysts have mixed views on Microsoft's stock, with some downgrading it due to high capital investment needs and potential value loss from AI partnerships.</p>

- Alphabet Inc. is poised to surpass Microsoft in market capitalization for the first time since 2018, with valuations of $3.637 trillion and $3.620 trillion, respectively.  
- The competition in AI is intensifying, as Alphabet's stock has surged 60% this year, driven by advancements like the Gemini AI model, while Microsoft faces challenges with high capital costs in its AI investments.  
- Analysts express concerns about Microsoft's partnerships potentially diluting value from its core products, leading to a downgrade in its stock rating.

Alphabet is about to pull ahead of Microsoft in this measure of tech supremacy