After hours last week, Alphabet's market capitalization briefly surpassed NVIDIA's. Over the past six months, Alphabet's stock has risen 43%, far outpacing NVIDIA's 6.3% gain during the same period, causing the market cap gap between the two companies to narrow rapidly—they now differ by only about $400 billion.
Over the past year, Alphabet (GOOGL.O) has achieved a nearly complete reversal in market perception. Previously, investors feared that AI chatbots would undermine its core search business, but now, an increasing number of investors view Alphabet as one of the most comprehensive infrastructure winners of the AI era.
In after-hours trading last week, Alphabet's market capitalization briefly surpassed that of NVIDIA (NVDA.O). As of last week’s close, Alphabet’s market cap was approximately $4.8 trillion, while NVIDIA’s was around $5.2 trillion.
Over the past six months, the gap between the two companies has narrowed significantly. At the end of October last year, NVIDIA's market capitalization was close to $4.9 trillion, while Alphabet's was under $3.4 trillion; since then, Alphabet's stock has risen by 43%, compared to just a 6.3% increase for NVIDIA over the same period. Over the past 12 months, Alphabet's stock has accumulated a gain of approximately 160%.
The key to Alphabet's revaluation lies in Wall Street's growing consensus that Google not only possesses model capabilities such as Gemini and DeepMind, but also controls distribution channels including Google Cloud, TPU chips, the search gateway, YouTube, and Android, covering nearly all critical segments of the AI value chain.
Gene Munster, Managing Partner at Deepwater Asset Management, said:
Google is one of the two companies best positioned in the AI field, as they control most segments of the value chain—chips, models, infrastructure, and distribution channels. Additionally, their profitability is extremely strong.
Anthropic trading ignites market enthusiasm
Market sentiment has further intensified due to news of a major collaboration between Anthropic and Google Cloud.
Last week, reports emerged that Anthropic pledged to invest $200 billion in Google Cloud over the next five years to secure approximately 5 gigawatts of computing power. Following the announcement, Alphabet’s market capitalization briefly surpassed NVIDIA in after-hours trading.
Investors see this as further evidence that Alphabet has multiple ways to participate in the AI competition and generate profits.
After Alphabet reported its earnings last week, JPMorgan (JPM.N) named it a "top pick" in the technology sector, citing accelerating growth. The earnings report showed that Google Cloud's backlog nearly doubled to $462 billion.
Citizens analyst Andrew Boone expects Alphabet to generate approximately $3 billion in revenue from TPU-related infrastructure in 2026, increasing to $25 billion by 2027.
Google CEO Sundar Pichai also stated that future Google Cloud customers will be able to run Google TPU chips in their own data centers.
Wall Street begins to worry about customer concentration risk
However, some analysts remain cautious about the current hype. The biggest question is how much of Google Cloud’s backlog of orders comes from Anthropic.
If the alleged $200 billion Anthropic agreement is compared to Alphabet’s disclosed $462 billion cloud backlog, it suggests that Anthropic could account for more than 40% of future contracted revenue.
D.A. Davidson analyst Gil Luria believes this is very similar to Oracle's (ORCL.N) previous experience. Last year, Oracle's stock surged due to a sharp increase in backlog orders, but the market later discovered that most of this growth actually came from OpenAI.
Luria said, “They did exactly what Oracle did—they told us that backlog roughly doubled, without disclosing that nearly all of the increase came from a single deal with Anthropic.” He currently maintains a “Hold” rating on Alphabet.
Luria also believes that major cloud providers currently face widespread customer concentration risk. Microsoft (MSFT.O), Oracle, Amazon (AMZN.O), and Google collectively hold nearly $2 trillion in cloud backlog orders, nearly half of which comes from OpenAI and Anthropic—AI companies that are themselves receiving funding from cloud providers.
He said that when Google and Amazon promote strong demand for their own chips, a significant portion actually comes from their invested companies, not genuine organic market demand.
TPU has become Google's new core advantage.
Wall Street is now more focused on Google’s competitiveness in AI infrastructure than on its search business.
Mizuho Securities estimates that approximately $61 billion of Google Cloud's backlog may come from TPU sales by 2027, with most of this revenue likely to be recognized next year.
This has also made Google an important bet on AI hardware beyond NVIDIA. Since the beginning of this year, the stock prices of AMD (AMD.O), Intel (INTC.O), and Micron Technology (MU.O) have all more than doubled, as the market seeks new beneficiaries in AI hardware.
Monster believes that even if Anthropic encounters problems in the future, other AI companies will step in to meet the demand.
He said, “News about the scale and risk of a single client actually misses the point. If one client fails, dozens of other companies will step in to fill its place in the long term.”
In his view, Anthropic’s massive agreement itself demonstrates that the AI industry is still in its very early stages, with demand for computing power continuing to grow exponentially.
Alphabet's biggest risk has become its valuation.
Today, Alphabet's greatest risk is no longer falling behind in AI, but whether the market has already priced in future growth expectations.
Alphabet's current expected P/E ratio is approximately 28 times, significantly higher than the historical average of less than 21 times over the past decade and nearing the upper range of levels seen since 2008.
According to Bloomberg-compiled data, over the past month, analysts raised their consensus estimate for Alphabet’s 2026 net profit by approximately 19%. Even so, the average analyst target price for the next 12 months is around $422, just 5% above the current stock price. Munster said:
The greatest risk of holding Google is that the company may no longer be able to change investor expectations through new narratives.
This makes the upcoming Google I/O conference particularly crucial. Investors are hoping the company will further clarify Gemini’s Agent strategy and demonstrate how it can continue to monetize from the broader AI ecosystem.
Currently, Alphabet expects its capital expenditures this year to reach up to $190 billion, more than double the amount in 2025.
Although Argus analysts believe the capital expenditure risk is worth noting, they still maintain a "Buy" rating, noting that Google’s ability to make such a large investment, compared to companies like OpenAI, is itself a competitive advantage.
Luke O’Neill, Chief Investment Officer at CooksonPeirce Wealth Management, said: “Alphabet holds a significant position in nearly every corner of the AI ecosystem, and this comprehensive presence positions it as a leading contender to be the biggest winner in the AI era.”
He believes that Alphabet’s business is more diversified compared to NVIDIA, which is more reliant on AI chip cycles, so even if one business slows down, others can compensate.
Last year, Berkshire Hathaway (BRK.A), led by Warren Buffett, also purchased shares of Alphabet. O’Neil quoted Buffett as saying, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
He said, "Even though it's no longer ridiculously cheap, this price is still reasonable. Without a doubt, it's a great company."