Alphabet (NASDAQ:GOOGL) entered the AI boom with many assuming it had the most to lose. Yet, sentiment has shifted dramatically as the year wraps up, and the search giant is now seen as one of the strongest contenders to benefit from the AI transition.
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And Pivotal’s Jeffrey Wlodarczak is responding. The analyst just boosted his price target from $350 to a new Street-high of $400, suggesting GOOGL shares will gain 24% over the coming months. (To watch Wlodarczak’s track record, click here)
According to Wlodarczak, the bullish case rests on several core strengths. First, search remains Alphabet’s “resilient cash cow,” armed with pricing power and serving as the engine behind its best-in-class Gemini AI. As Gemini becomes more central to Google’s search experience – gradually replacing much of Google’s legacy traffic – the economics get increasingly attractive. Apple now paying to access Gemini marks a major turning point, shifting revenue-sharing dynamics sharply in Alphabet’s favor and opening the door to meaningfully higher margins as AI search scales.
Secondly, by leveraging search, Gemini seems to be the leading AI right now, strengthened by years of research and investment, “massive financial firepower,” and access to huge amounts of data. Wlodarczak anticipates that Gemini could continue gaining share vs. OpenAI, potentially at an accelerated rate, aided further by Google’s AI partnership with Apple. By 2026, this could pressure OpenAI to scale back on capital expenditures due to significant obligations and likely declining market share, a situation further worsened by OpenAI’s shift toward advertising, which could make its platform less appealing.
Meanwhile, Google’s TPUs provide a “sustainable competitive advantage” over other AI and cloud competitors and could become a “material driver of value” through eventual sales to external customers like Meta and Anthropic. TPUs might also capture meaningful market share from Nvidia, while there is also potential for the TPUs to eventually replace other companies’ internal chips (which could negatively impact partner Broadcom).
Furthermore, with existing relationships covering over 95% of handsets outside China – along with the newly announced Apple AI partnership, exclusive search agreements, and leading AI capabilities – Gemini is well-positioned to become the dominant AI on handsets and glasses. Wlodarczak believes these devices will likely serve as the primary interface for AI.
And the icing on the cake? Google owns the world’s largest video and audio streaming platform, YouTube and YouTube TV, along with an increasingly compelling autonomous driving business in Waymo and quantum computing assets. With its connection to over five billion consumers, Google is well-positioned to launch new businesses that capitalize on its “dominant market position.”
As for the prospect of a 2026 market crash driven by OpenAI issues, Wlodarczak notes that if his thesis on OpenAI cutting capex and facing issues from declining market share and large obligations plays out, things could get “pretty ugly for AI stocks and the market in general.” However, the analyst expects any shakeout to resemble 2000 – a necessary consolidation that ultimately leaves fewer, far stronger competitors, with Alphabet “leading the way.”
So, it’s no surprise Wlodarczak rates GOOGL a Buy, and the rest of Wall Street largely shares that view. With 28 additional Buys and just 7 Holds, the stock carries a Strong Buy consensus. The current average price target of $320.15 suggests a modest downside from current levels, but that outlook could shift quickly. If momentum keeps building, more upward revisions may not be far behind. (See GOOGL stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.