Alphabet enters the Dow Jones but loses $250 billion in market capitalization: the paradox of the AI race
This week, Google's parent company, Alphabet (GOOGL), officially joined the elite Dow Jones Industrial Average club, replacing Verizon Communications. The change, effective June 29, marks a significant milestone for the stock market. However, beneath the luster of this prestigious inclusion lies deep internal turbulence.
Shifting Milestones: From Telecom to AI
The decision by S&P Dow Jones Indices to replace Verizon, whose index weight was a meager 0.5%, with Alphabet is not merely a technical adjustment. It is a clear signal of a changing of the eras. Alphabet's higher stock price will automatically give the company significantly more weight in this price-weighted benchmark. The Dow Jones, losing its last representative from the telecommunications sector, is becoming even more concentrated around technology and, specifically, artificial intelligence. Amazon had previously joined the index, while Apple and Microsoft have long been its pillars. Now, Alphabet has joined them.
Two Resignations — Minus $250 Billion
However, the paradox of the situation is that the news of inclusion in the Dow Jones did not save Alphabet's stock from a crash. On the day of the announcement, the company's shares plummeted by 6% — the sharpest drop since February and the worst trading session in nearly a year. As a result, Alphabet's market capitalization shrank by nearly $250 billion in a single day.
The cause of the panic is not macroeconomics, but a personnel crisis at the very heart of Google's AI strategy. Two key figures left the company simultaneously. Nobel laureate in Chemistry 2024, John Jumper, creator of AlphaFold, left Google DeepMind for Anthropic after nearly nine years of work. Just a few days earlier, on June 18, Noam Shazeer — co-author of the revolutionary 2017 paper "Attention Is All You Need" and one of the leaders of the Gemini project — announced his move to OpenAI. Recall that less than two years ago, Google paid about $2.7 billion to bring Shazeer back from Character.AI.
Cryptalist Analysis
Inclusion in the Dow Jones is undoubtedly a recognition of Alphabet's scale and influence. But from a fundamental analysis perspective, it is more of a belated reflection of past achievements. The market looks forward, and what it sees is the flight of key minds from Google's most ambitious AI project. No place in a prestigious index can resolve a personnel crisis. Alphabet approaches June 29 with a brilliant status, but with a serious crack in the foundation of its future.