Despite some volatility, Alphabet (GOOGL) stock has surged 118% in the last 52 weeks. This rally is significant considering the fact that markets have become wary of mounting capital investments in the tech space. As a matter of fact, GOOGL stock has even outperformed technology giants like Meta Platforms (META), Microsoft (MSFT), and Nvidia (NVDA) over the past 12 months.
What is driving the big rally for GOOGL stock? With the market focused on artificial intelligence (AI), Alphabet seems to be making big strides in terms of innovation and shipping of AI-driven products. While Apple (AAPL) is considered to be an AI laggard by some, Alphabet is among the leaders in the race.
In a recent development, Google unveiled its next-generation AI infrastructure: A5X. The A5X will be powered by Nvidia’s rack-scale systems and offers 10 times more computing power compared to the previous generation. Further, A5X can scale 960,000 GPUs across multiple sites, therefore enhancing market competitiveness and providing Google with an edge.
About Alphabet Stock
Headquartered in Mountain View, California, Alphabet is a provider of products and platforms globally, from Google Search, Ads, Chrome, and Google Cloud to platforms like YouTube and operating systems like Android. Alphabet has a market capitalization of $4.1 trillion.
For fiscal 2025, Alphabet reported 15% year-over-year (YOY) growth in revenue to $402.8 billion. For the same period, operating income was $129 billion, implying an operating margin of 32%.
Alphabet has been investing significantly in AI infrastructure. In fiscal 2025, total capital expenditures came to $91.4 billion. For the current year, the company is planning for capex of $175 billion to $185 billion.
While GOOGL stock was trending lower on the back of capex concerns, there has been a sharp reversal in the trend of late. As a result, the stock has returned 33% in the last six months. As the markets look beyond capex concerns, shares of the technology giant will likely trend higher.
Alphabet Has Multiple Growth Engines
Alphabet ended fiscal 2025 with a $70 billion annualized run rate in the cloud business. For Q4, Google Cloud revenue growth was also robust at 48% YOY. At the same time, the company's cloud backlog swelled to $240 billion, making Google Cloud one of the firm's key growth drivers over the next few years.
Similarly, in the fourth quarter, CEO Sundar Pichai highlighted that the Gemini app has more than 750 million active users. As of fiscal 2025, Alphabet had more than 325 million paid subscribers across its family of services. With AI being a driving factor, subscription revenue will likely continue to swell and boost free cash flows.
Finally, Google is positioned to benefit from its strategic stakes in SpaceX and Anthropic. According to reports, Alphabet could make $100 billion or more from its investment in SpaceX once the company goes public. Alphabet also has an approximately 14% stake in Anthropic. With the AI company potentially valued at $800 billion, the value of that stake would be in excess of $100 billion.
What Do Analysts Say About GOOGL Stock?
Based on 55 analysts with coverage, GOOGL stock has a consensus “Strong Buy” rating. An overwhelming majority of 46 analysts have a “Strong Buy” rating for the stock, while four analysts have a “Moderate Buy” and five have a “Hold” rating.
The mean price target of $380.58 represents potential upside of about 4% from current levels. Further, the most bullish price target of $420 suggests that shares could climb a possible 24% from here.
Earlier this month, BNP Paribas opined that concerns related to Alphabet's AI spending are overdone. Analyst Nick Jones believes that “current investment levels are both appropriate and necessary” considering the potential opportunity.
The overall bullish view of analysts is further underscored by the fact that GOOGL stock trades at an attractive forward price-to-earnings (P/E) ratio of 28.6 times. With factors like structural industry tailwinds, innovation, and a steady growth outlook, the stock's uptrend is likely to sustain.
On the date of publication, Faisal Humayun Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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