Alphabet crossed the $4.5 trillion market capitalisation threshold for the first time on Monday, driven by AI optimism and a favourable antitrust ruling that allows the company to retain control of Chrome and Android.

The Google parent’s Class A shares rose 3.8% to $375 while Class C shares climbed 3.7% to $376, both hitting record highs.

The milestone places Alphabet alongside Apple and Microsoft in the $4.5 trillion club, though still trailing AI chipmaker Nvidia’s world-leading $6.4 trillion valuation.

Alphabet’s shares have surged 32% year-to-date, making it the top performer among the “Magnificent 7” tech stocks and significantly outpacing the S&P 500’s 12.5% gain.

The communications services sector housing Alphabet has jumped over 26% this year, leading all major market sectors.

The rally reflects broader tech momentum, with AI-linked stocks powering major indexes to record highs amid expectations of Federal Reserve rate cuts.

Oracle’s strong forecast last week further energised the AI trade.

“There has been no other sector in the past 18 months, maybe even two years that has had such excitement from investors,” said Kim Forrest, chief investment officer at Bokeh Capital Partners.

Investor confidence strengthened after a U.S. court allowed Alphabet to maintain control of Chrome browser and Android operating system earlier this month.

While the ruling requires sharing data with advertising rivals, avoiding divestiture of these core assets removed a major overhang for investors.

The decision marks a pivotal moment for Alphabet, whose dominance in search and mobile ecosystems has drawn sustained regulatory scrutiny.

Chrome and Android are viewed as integral to Google’s overall business model and advertising ecosystem.

Alphabet’s cloud computing unit delivered a 32% revenue jump in Q2, surpassing expectations as investments in proprietary chips and the Gemini AI model began generating returns.

This diversification is reshaping investor perceptions of the company.

“Investors are starting to see that possibility that this isn’t just a search company anymore, this is a company that’s moving into a lot of other things,” said Dennis Dick, chief strategist at Stock Trader Network, citing YouTube, Waymo autonomous vehicles, and other initiatives.

Despite the milestone, Alphabet trades at approximately 23 times forward earnings, the lowest valuation among the Magnificent 7 stocks.

This compares to its five-year average of 22 times, according to LSEG data, suggesting room for further gains despite the recent rally.

For comparison, Nvidia trades at over 40 times forward earnings, while Microsoft and Apple command premiums above 30 times, reflecting Alphabet’s relatively modest valuation despite its AI capabilities and market position.

For Australian investors, Alphabet’s rise impacts local portfolios through direct holdings and index funds.

The company represents approximately $4.5 trillion in market value at current exchange rates, larger than Australia’s entire ASX market capitalisation of roughly $2.8 trillion.

Local tech funds and global equity portfolios have benefited from Alphabet’s surge, with many Australian superannuation funds holding significant positions in Magnificent 7 stocks.

The company’s P/E ratio below other tech giants may attract value-conscious Australian investors seeking AI exposure.

Alphabet’s entry into the $4.5 trillion club validates its AI strategy and diversification efforts while highlighting tech’s continued market dominance.

With cloud growth accelerating, regulatory concerns easing, and AI capabilities expanding through Gemini, the company appears well-positioned despite its massive scale.

However, challenges remain including ongoing antitrust scrutiny, competition in AI from Microsoft-backed OpenAI and others, and the need to monetise AI investments while protecting search revenue.

The relatively modest valuation suggests markets are pricing in these risks while recognising the company’s fundamental strengths.