Google's 160% Surge Shows the Power of Owning AI's Full Toolkit

Alphabet briefly overtook Nvidia in market cap after hours this week - a stunning turnaround for a company many wrote off when the AI race began. The stock has climbed about 160% over the past year, fueled by a growing Wall Street consensus that Google is uniquely positioned across the AI stack: its own models, massive distribution, and a cloud business that's cashing in on other AI companies' growth.

Gene Munster of Deepwater Asset Management puts Google in a two-company club alongside SpaceX for owning "chips, models, infrastructure and distribution - and they're nicely profitable." JPMorgan analysts named Alphabet their top tech pick after earnings, noting a cloud backlog that nearly doubled to $462 billion. Mizuho raised its price target, arguing consensus still underestimates Google Cloud revenue over the next two years.

Yet skeptics see risk. A reported $200 billion commitment from Anthropic - which raises money from Google and spends much of it on Google Cloud - could represent over 40% of Alphabet's cloud backlog. D.A. Davidson's Gil Luria compares this to Oracle's situation with OpenAI, which led to a steep stock slide. "They told us their backlog doubled without saying almost all the increase came from one deal," Luria says.

Munster isn't worried. "The deal shows how early we are in AI. Even if Anthropic stumbles, dozens of companies will replace it." He sees Google's custom TPU chips as a growing advantage; Mizuho estimates $61 billion of cloud backlog through 2027 could come from TPU sales.

The real test comes at Google I/O in two weeks. With capex projected at up to $190 billion this year - more than double 2025's level - Google needs to show that its agent strategy with Gemini can generate sustainable revenue. The stock has already priced in a lot of future growth, leaving little room for missteps.

Source: CNBC