Alphabet Inc. Chief Executive Officer Sundar Pichai during the Bloomberg Tech Conference on Wednesday, June 4, 2025 in San Francisco, California, USA.
David Paul Morris | Bloomberg | Getty Images
alphabet A moment passed Nvidia The company’s rise to the top spot by market capitalization in after-hours trading this week is a remarkable feat for a company that was seen as being at great risk in the early days of the artificial intelligence boom.
The company’s stock has risen about 160% over the past year, fueled by an emerging Wall Street view that Google is well-positioned across the AI space, whether it’s its homegrown models, its large distribution network or its well-funded cloud division from other fast-growing AI businesses.
Of the seven U.S. technology companies, chip designers are broadcom was the next best performer in the past 12 months, with the stock up 107%.
“Google is one of the two best-positioned AI companies because it owns a large portion of the stack,” said Gene Munster, managing partner at Deepwater Asset Management. “The chips, the model, the infrastructure, the distribution. And on top of that, we’re making a pretty good profit.”
Another company he put in that category is Elon Musk’s SpaceX, which merged with xAI in February in a deal worth $1.75 trillion.
Following Alphabet’s financial results report last week, JP Morgan Analysts called the stock a “top overall stock” in the technology sector and cited an “outstanding quarter” as growth accelerated and cloud balances nearly doubled to $462 billion. Mizuho analysts raised their price targets, writing that consensus estimates still significantly undervalue Google Cloud’s revenue and operating profit over the next two years.
Alphabet ended this week with a market capitalization of $4.8 trillion, behind Nvidia’s $5.2 trillion. The pair briefly reversed after the market closed on Tuesday following reports that AI model developer Anthropic would spend $200 billion over five years on Google Cloud for 5 gigawatts of computing.
For investors, it was the latest sign that Google has many ways to make money and compete at the cutting edge. Gemini and DeepMind for AI models and research, Google Cloud for computing, tensor processing units (TPUs) as an alternative to Nvidia, and the ability to add AI capabilities to search, YouTube, and Android.
But in the eyes of some analysts, there is also reason for skepticism.
The main concern is how much of the backlog is likely to come from Anthropic. Anthropic is a cash-burning, heavily valued startup that has raised tens of billions of dollars from Google and is spending much of that money with Google on cloud services and TPUs.
The reported $200 billion Anthropic commitment could represent more than 40% of future contracted revenue when measured against Alphabet’s reported cloud backlog.
The next oracle?
DA Davidson analyst Gil Luria said the setup was reminiscent of what happened in the case. oraclethe stock soared in September after the company reported that its order backlog had increased by almost 360%. It quickly became clear that much of that was due to OpenAI.
“They did it the same way Oracle did,” said Luria, who recommends owning Alphabet stock. “They told us that their backlog had roughly doubled, but they didn’t tell us that almost all of that increase was due to one deal with Anthropic.”
Google did not comment on this article, only pointing to CFO Anat Ashkenazi’s comments at the company’s previous earnings call.
Oracle was punished after its stock lost about half its value in five months as investors realized that much of the backlog growth was tied to OpenAI. microsoft faces similar questions regarding OpenAI’s rollout.
Luria sees concentration risks across the major cloud providers. Microsoft, Oracle, Amazon Together with Google, the reported cloud backlog is nearly $2 trillion. Luria said nearly half of that money goes back to commitments from OpenAI and Anthropic, which both raise funding from the same group of companies.
Munster understands that concern, but doesn’t share it, at least as far as it concerns Google and Anthropic.
“This contract highlights how early-stage we are in the AI space,” Munster said. “Even though use cases are limited today, computing needs are increasing exponentially. Google will ride that wave.”
If Anthropic stumbles, other AI companies will eventually take its place, Munster said.
“Headlines about the size and risk of specific customers miss the point,” he says. “If one of these customers goes out of business, over time they will be replaced by dozens of others.”
Google’s clear new advantage is custom silicon.
Mizuho estimates that about $61 billion of Google’s cloud order backlog through 2027 will come from TPU sales, with most of that revenue likely to be recognized next year. This gives investors looking for an alternative to NVIDIA another way to buy into AI hardware trades, a theme that has been sweeping Wall Street lately. advanced micro device, intel and micron Everything is more than double this year.
Luria said some of the demand that Google and Amazon, which makes Trainium, are expecting for their chips will come from their portfolio companies.
“When Google and Amazon talk about demand for their chips, a lot of it is captive demand,” Luria said. “It’s not organic.”
For Munster, the biggest threat to Google’s continued outperformance is that the stock is already accumulating future profits. He likens that scenario to what’s happening now at Nvidia, which continues to experience significant growth but is no longer being compensated by investors.
Analysts expect Nvidia to post a 78% revenue increase when it reports results later this month, but the stock has only risen 15% this year, slightly outperforming the Nasdaq, according to LSEG.
“The biggest risk of owning Google is that you don’t have the opportunity to change your mind with investors,” Munster said.
Therefore, it will be more important for the company to make a good impression at Google I/O, which starts in two weeks. Google needs to clarify its agent strategy with Gemini and demonstrate that it can capture sustainable revenue from the broader AI ecosystem.
Google has gone from an AI laggard to an infrastructure winner in a short period of time. The company currently projects capital spending of up to $190 billion this year, more than double its 2025 capital spending. For investors to get a return on their investment, Google can’t afford to fail.
“Alphabet’s capital spending risks are significant,” Argus analysts said in a post-earnings report. However, they rate the stock a “buy” and see the company’s ability to cover these expenses as a “competitive advantage” compared to the likes of OpenAI.
WATCH: Google leans on custom chips as it pushes deeper into enterprise AI
