Google's AI Gamble: More Than Just Hype?
Alphabet's stock (GOOGL) is on a tear, and the narrative is all about AI. The stock is up nearly 70% over the last year, leading some to wonder if it's overvalued. But let's dig into the numbers, peel back the layers of hype, and see what's really driving this surge.
The headlines scream "AI dominance," fueled by news like Meta potentially buying AI chips from Google. And CEO Sundar Pichai boasts about Google Cloud's "accelerating growth," with more billion-dollar deals in the first nine months of 2025 than in the previous two years combined. That sounds impressive, right? But what does it actually mean in terms of hard numbers?
Let's look at Google Cloud. Revenue is up 34% year-over-year in Q3, and operating income jumped an impressive 85% to $3.6 billion. That's a significant improvement, but consider this: that $3.6 billion is still only about 10% of what Google earns from its core Google Services (search, advertising, subscriptions). Cloud is growing fast, sure, but it's still a relatively small piece of the overall pie. The question is: can Google Cloud, fueled by AI, become a meaningful counterweight to any potential decline in search advertising revenue?
The Gemini Factor & the Nvidia Question
Then there's Gemini 3. Early reactions are "kind of a wow," according to Oakmark Funds portfolio manager Bill Nygren. Evercore ISI analyst Mark Mahaney says Google is "no longer a Classic DHQ stock" but is impressed by the fundamentals and innovation. But "kind of a wow" isn't a quantifiable metric. We need to see how Gemini 3 translates into actual user adoption, increased cloud revenue, and, ultimately, higher earnings. Google Stock Is No Longer Cheap as Alphabet’s Gemini 3 Is ‘Kind of a Wow’
And let's not forget Nvidia (NVDA). The article asks, "is Nvidia's reign under serious threat?" That's a loaded question. While Google is clearly making strides in AI, Nvidia still dominates the AI chip market. Google selling chips to Meta doesn't automatically dethrone Nvidia. It just means Google is playing multiple angles in the AI game – developing its own AI models and potentially profiting from selling the infrastructure that other companies need to run their AI. It's a smart move, but let's not crown Google the AI king just yet. Google Alphabet stock price today: Alphabet shares surges 6% as Google roars back in AI — is Nvidia’s reign under serious threat? Here’s the key reason
The analyst consensus is a "Strong Buy" for GOOGL, with an average 12-month price target of $312, representing a mere 4.12% upside potential. That's hardly a ringing endorsement, especially after a 70% run-up in the past year. It suggests that analysts, while optimistic, aren't expecting another massive surge anytime soon. (Analysts' price targets, as I've observed, tend to lag behind actual market movements.)
The Reality Check: It's Still About Advertising
Ultimately, Alphabet's future hinges on its ability to translate AI hype into tangible earnings growth. Google Cloud is promising, Gemini 3 is intriguing, and the company's massive cash reserves give it plenty of firepower. But let's not kid ourselves: Google is still, at its core, an advertising company. The real question is whether AI can enhance its advertising business and whether it can successfully diversify into new, AI-driven revenue streams before its core business starts to decline.
