Key Takeaways
- Alphabet’s Gemini 4 Carbon now ranks first on Artificial Analysis’s Intelligence Index, and a16z’s Martin Casado says the best frontier models take more than 80% of AI spending, weighted by dollars.
- The ranking hasn’t won Alphabet that spending yet: Anthropic and OpenAI hold 86% of enterprise API spend, and few customers can use Carbon so far.
- Alphabet still earns money from the AI labs that win, because Google Cloud sells computing and TPUs to customers including Anthropic and, reportedly, Meta Platforms.
- Fourth-quarter results, due in early February, are the first to cover a full quarter of Gemini 4. They’re the first real test of whether the lead brings in revenue.
Alphabet (GOOG) has the smartest AI model in the world, at least on one closely watched scoreboard.
Last week, CEO Sundar Pichai introduced Gemini 4 Carbon. It ranks first on the newly updated version of Artificial Analysis’s Intelligence Index, with a score of 59, and it came out just two weeks after Gemini 4 Argon. Pichai said Carbon “shows the pace at which we’re pushing the frontier.”
On this week’s episode of Invest Like the Best, a16z’s Martin Casado explained why that pace matters. In a fast-growing market, he said, being on the frontier brings “tremendous pricing power,” and “these frontier models that are the best tend to get 80% plus of the market dollar weighted.”
Markets don’t get much more winner-take-most than that.
And Alphabet could use a win. Investors have been punishing the stock over Search. Third-quarter Search revenue came in about $1.5 billion below expectations, and management said AI Mode monetizes at a lower rate.
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The money hasn’t moved yet
On Tuesday’s episode of TBPN, co-host John Coogan read out this figure: “Anthropic and OpenAI now account for 86% of enterprise LLM API spend, up from 67%.” He added that Google’s share of spending by enterprise developers fell by more than half.
So being ranked No. 1 hasn’t yet made Alphabet No. 1 in what businesses pay for.
Part of that is timing. Few customers can buy Carbon yet. Pichai said some trusted cyber defenders get access first, with “wider availability soon.”
By Casado’s logic, customers would switch quickly once they can. He argued that companies competing with each other won’t settle for a weaker model: “In competitive equilibria, you would always pay 10 times more for the smartest model.”
Wall Street is already counting on a lot. Analysts expect Alphabet’s revenue to nearly double, from $403 billion in 2025 to $776 billion in 2028.
Carbon’s ranking shouldn’t move those estimates much by itself, since so few customers can use it yet.
Staying No. 1 costs a fortune
A lead doesn’t last long, either. Casado puts a model’s lifespan at three to six months. A lab that tops the charts and then slips by three months could “lose the entire market,” he warned.
So Alphabet has to keep shipping, as it did with Argon and Carbon two weeks apart. It can afford to. Its operating margin was 32.0% in 2025, up from 26.5% in 2022.
That margin is after paying for the research behind Gemini, which Alphabet books outside its business segments. Its annual report shows those company-level costs rose 59% to $16.8 billion in 2025.
The computing is a bigger bill. Analysts now expect free cash flow of negative $18.0 billion this year, and capital spending to reach $308.0 billion in 2027.
Alphabet gets paid either way
Gemini doesn’t have to win every dollar for Alphabet to profit from AI spending.
Right after Coogan read out the 86% figure, his co-host pointed out that much of that spending runs through Google Cloud and pays for Google’s TPU chips. Cloud revenue grew 103% last quarter, and TPU system sales were a meaningful part of that. Alex Kantrowitz, host of the Big Technology Podcast, said last month that Anthropic has committed $111 billion to Alphabet over the next decade.
Even companies with their own AI ambitions are Google Cloud customers. Meta Platforms (META) nearly doubled its capital spending in 2025, to $69.7 billion.
Even after that build-out, The Information reported in February that Meta agreed to rent Google’s TPUs.
Worth chasing, but the cloud is the safer bet
The way I see it, Carbon gives Alphabet a real shot at the 80% Casado describes, but Anthropic and OpenAI still control the enterprise spending. The surer payoff is Google Cloud, which earns from the frontier no matter whose model leads it.
Of course, the rankings change every few months. Fourth-quarter results in early February will show us whether Gemini 4’s lead is turning into usage and revenue.
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