The US stock market is now 50% larger than the bond market, a gap we haven’t seen since the 1970s. And quietly sitting near the centre of it all? Alphabet and Tesla, two familiar names navigating an AI-fuelled moment that’s reshaping the investing landscape.
This isn’t just another stock rally. It’s a story of shifting priorities: risk over safety, ambition over stability, algorithms over interest rates. Since 2020, investors have poured trillions into equities – not just chasing growth, but chasing the future, wherever AI might lead.
Alphabet, despite facing threats to its search empire, is reportedly lending its cloud infrastructure to OpenAI. Tesla, even with political drama in tow, is inching closer to launching autonomous robotaxis in Texas. Neither move guarantees dominance – but both reflect how AI is being woven into strategies that could redefine what these companies are, and what the market values next.
US market out of balance
Let’s zoom out.The total value of US stocks has surged by $38 trillion since 2020, up 69%. Bonds, traditionally the steady hand of the financial world, are up only $17.8 trillion over the same period, a 40% gain. That imbalance has pushed the bond market down to just 68% of the size of the stock market – the lowest ratio since the disco era.
This matters because when stocks stretch too far ahead of bonds, it often signals a market that’s running on momentum rather than fundamentals. We’ve seen it before. And while history doesn’t repeat, it often rhymes. The big difference this time is the market’s latest obsession, artificial intelligence, and the companies seen as its main carriers.
Alphabet AI: The unlikely AI middleman
One of the most surprising developments this past week was the news that Alphabet may be working with OpenAI – the very company that’s eating into its search business.
According to Reuters, OpenAI has agreed to use Google Cloud’s infrastructure to help train and deploy its AI models. While the deal hasn’t been officially confirmed, the report alone lifted Alphabet’s share price by over 3% before settling slightly lower.
Why the fuss?
This is not just a tech story – it’s a strategy story. OpenAI’s ChatGPT is widely seen as a direct challenge to Google’s search dominance, with some analysts predicting it could take 30% of the search market by 2030. That’s potentially £80 billion in annual ad revenue on the line.
So what’s Alphabet doing, seemingly enabling a rival? The answer lies in scale. Training large AI models requires enormous computing power, and Google Cloud wants a piece of the action – even if it means doing business with a company aligned with Microsoft.
It’s a calculated move, but not without risks. Analysts have called it a win for Google’s cloud division, but the threat to its ad business hasn’t gone away. Alphabet’s valuation may look reasonable at 19x earnings, but that discount could reflect deeper investor uncertainty around its long-term strategy.
Tesla AI: A real-world test of AI
While Alphabet deals in servers and software, Tesla is putting AI on the road – literally.
The company is gearing up to launch its robotaxi service in Austin, Texas. Its listing as an autonomous vehicle operator is now live on the city’s Transport and Public Works website. Initial trials will include 10 – 20 vehicles, each monitored by remote teleoperators in case something goes wrong.
For all the talk of AI in chatbots and cloud APIs, Tesla’s approach is more visible – and arguably more fragile. Autonomous driving has always been a high-stakes goal, and robotaxis add another layer of complexity, both technically and politically.
The stock has been volatile – not just because of tech but also because of Elon Musk’s increasingly public clashes with Donald Trump. A spat over government spending recently wiped 15% off Tesla’s market cap in a matter of days.
Some recovery followed as Trump softened his tone, but the episode highlighted a deeper concern for investors: key person risk.
Still, Tesla’s ambitions remain intact. If early tests go well, analysts expect the robotaxi programme to expand to 20–25 cities over the next year. Whether that becomes a commercial success or a costly experiment remains to be seen, but Tesla’s AI ambitions and investor sentiment are clearly intertwined.
What the rise of AI stocks means for the market
The rise of AI-linked stocks like Alphabet and Tesla is playing out against a backdrop of record market imbalance.
In normal times, bonds offer a safety net – a place for capital to hide when equities wobble. But higher interest rates and inflation concerns have made bonds less popular, and AI’s allure has only amplified the equity tilt.
That’s not to say a crash is imminent. But historically, when one side of the market becomes too dominant, as stocks are now, some kind of adjustment tends to follow. Whether that’s a rotation back into bonds or a broader market pullback depends on what comes next: real earnings or dashed expectations.
Disclaimer:
The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice. The information may become outdated. We recommend you do your own research before making any trading or investment decisions.
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