Alphabet shares are set to outperform again because the company has the “3 key traits of [an] AI winner,” according to Wells Fargo. Analyst Ken Gawrelski upgraded the Google and YouTube parent to overweight from equal weight. His price target of $387, up from $354, signals upside of more than 22% from Friday’s close. Alphabet shares are up 75% over the last 12 months, far outpacing the S & P 500 14% advance. But the stuck has struggled recently along with the rest of the Magnificent 7. Alphabet shares are down 4% in the past one month and are little changed for the year. GOOGL .SPX 1Y mountain GOOGL vs SPX 1yr Gawrelski gave three characteristics Alphabet has that positions it to dominate in AI: data, distribution and computing capacity. “[We] believe GOOGL has all the pieces necessary to be an AI winner, with an industry-leading capacity position to support internal efforts (Search, Gemini) and monetize externally through GCP, broad distribution network, and vast consumer data,” Gawrelski wrote. Gawrelski pointed to Alphabet’s efforts to expand artificial intelligence compute capacity to 35 gigawatts by 2028 from 15 gigawatts at the end of last year. It “increasingly appears hyperscaler ambitions are bounded by compute capacity,” he said. “As this market construct persists medium term, [we] see Google gaining competitive advantage as it widens capacity leadership vs. peers.” Gemini monetization will also drive the stock. Gawrelski projects Gemini average recurring revenue will triple to $12 billion by the end of 2027 from $4 billion at the end of last year. Alphabet ticked slightly higher in the premarket following the upgrade. The upgrade puts Gawrelski in line with the rest of Wall Street. According to LSEG, 52 of 61 analysts covering the tech giant rate it a buy or strong buy. The average price target signals upside of nearly 14%.
