Alphabet (NASDAQ:GOOGL) has been on quite a tear of late, bounding up the charts through the latter half of 2025. The company’s strong showing has continued in the new year as well, and Alphabet has recently overtaken Apple as the second biggest publicly-traded company in the world.
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The AI revolution has provided significant tailwinds for the Internet giant, helping to propel GOOGL’s share price up by 77% during the past twelve months. Indeed, Alphabet seems to be benefiting from all sides of the AI gold rush.
Its Gemini 3 LLM has gotten rave reviews, AI Overviews have more than 2 billion monthly users, and its Google Cloud saw revenues grow by 34% last quarter to $15.2 billion in the last reported quarter (and the company announced a backlog of $155 billion).
Investor Kenio Fontes has been an Alphabet bull for some time, previously predicting that its AI efforts would yield trillion-dollar results.
“The Alphabet case is sensational,” declares the 5-star investor. “GOOGL’s AI initiatives, especially Gemini and new retail partnerships, are rapidly translating optionality into tangible revenue streams.”
Fontes points out that the company is actively working on increasing Gemini’s business capabilities, citing partnerships with Walmart and Shopify, among others. These initiatives will allow users to find products and execute purchases, without ever leaving the chat. The investor underlines that Alphabet – with its huge Google Search reach – is uniquely placed to capitalize on this trend.
“It already has the entire ecosystem and all the data to know which partner will be best for the user and which product to offer to have the best chance of closing the sale and pleasing the user,” adds Fontes.
Alphabet also has exciting prospects on the hardware side of the ledger, posits the investor. He mentions the recent launch of Ironwood, its 7th-generation TPU for inference. Fontes believes this development will serve as “a great flywheel” for the company, fueling efficiency and reducing costs.
However, all this growth comes with a wrinkle for investors, and Fontes argues that the time has come to “temper expectations a little.” The investor points out that GOOGL’s forward price-to-earnings ratio of 29x is higher than its 5-year average of 23.5x. Moreover, market estimates of double-digit revenue growth – which Fontes emphasizes are very achievable – don’t leave much margin for error.
“Therefore, I am downgrading from a Strong Buy to a Buy, with an optimistic but also more cautious stance,” adds Fontes. (To watch Kenio Fontes’ track record, click here)
Wall Street’s faith in GOOGL seems to have been rewarded as well. With 27 Buys and 7 Holds, GOOGL enjoys a Strong Buy consensus rating. However, it has pretty much reached its 12-month average price target, implying that Wall Street analysts don’t envision much additional upside in the year ahead. (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.