Alphabet shares surge 7pc on AI expectations

The world’s fourth most valuable firm was set to add more than $100bn (€90bn) to its market capitalisation, based on pre-market movements. Its shares have rallied 39pc this year on the hype around artificial intelligence.

Wall Street analysts said the company’s better-than-expected quarterly earnings showed the strong position of Google Search even as advertisers remain cautious, with steady growth in the cloud business, and Google was well placed to compete with Microsoft in AI.

“Don’t call it an AI comeback,” said analysts at Jefferies.

Jefferies was among the 16 brokerages that raised their price targets, with several of them saying AI had started to contribute to Google’s cloud revenue and helped drive a 28pc growth in the quarter that widely surpassed expectations.

Alphabet has rolled out a series of AI products this year and revamped its search engine with the technology as it competes with Microsoft in a race to dominate the nascent field.

The maker of Windows also topped expectations on Tuesday, powered by growth in its Azure cloud unit, the part of its business best situated to capitalise on the booming interest in AI.

The median price target on Alphabet now stands at $138, which is nearly 13pc higher than the stock’s last close.

Meanwhile, Microsoft laid out an aggressive spending plan to meet demand for its new artificial intelligence services after surpassing Wall Street estimates for fiscal fourth-quarter revenue and profit.

Costs rose sharply as Microsoft built new data centres to support AI