Alphabet Faces DOJ Scrutiny Over Federal Contract Diversity Initiatives

As 2025 draws to a close, Alphabet Inc., the parent company of Google, finds itself under renewed examination by U.S. authorities. The Department of Justice (DOJ) has initiated a probe into the technology conglomerate and other federal contractors, this time focusing on potential breaches of procurement rules tied to corporate diversity programs. The company's shares showed little immediate reaction, trading near $314 on Monday, only marginally below the prior session's close.

Amid this regulatory attention, Alphabet is simultaneously securing the long-term energy infrastructure critical for its artificial intelligence ambitions. Late last week, the firm entered into a definitive agreement to acquire U.S. energy developer Intersect Power for approximately $4.75 billion, including assumed debt. Subject to regulatory approvals, this transaction is slated for completion in the first half of 2026.

Intersect Power specializes in developing solar and storage projects, with a concentration in Texas and California. These are regions where Google already operates multiple hyperscale data centers. The acquisition provides Alphabet with a dedicated pipeline of renewable energy, designed to scale alongside the escalating power requirements of its AI models. Scaling the computationally intensive Gemini training clusters would be challenging without a robust energy supply, making this move a logical strategic step.

Investigation Centers on False Claims Act

Recent reports indicate the DOJ is examining whether Alphabet’s Diversity, Equity, and Inclusion (DEI) initiatives for roles connected to federal contracts may have violated existing regulations. The inquiry is grounded in the False Claims Act, a statute that penalizes the submission of false information to the government.

Should investors sell immediately? Or is it worth buying Alphabet?

To date, no specific allegations or formal charges have been made public. For Alphabet, this probe adds another item to a regulatory agenda that already includes ongoing antitrust litigation. The investigation is not currently expected to impact operational performance or financial forecasts.

Robust Performance Overshadows Regulatory Concerns

Despite recurring scrutiny from regulators, Alphabet has been a standout performer among the "Magnificent Seven" stocks in 2025. Its equity has appreciated roughly 63% year-to-date, fueled by a record-breaking quarter this fall. The company’s revenue surpassed the $100 billion threshold for the first time in Q3, reaching $102.35 billion. Google Cloud expanded by 35% year-over-year, and its backlog of commitments swelled to $155 billion.

Investments in computational capacity remain substantial, with planned capital expenditures between $91 billion and $93 billion for 2025 and 2026. The market anticipates Q4 results in late January 2026. The majority of analysts maintain a positive outlook, with average price targets hovering near $316.