Alphabet’s Rather Good Run

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One observes with a certain detached amusement that Alphabet (GOOG 1.11%) (GOOGL 1.07%) has, at long last, achieved a market capitalization exceeding four trillion dollars. Microsoft and Apple, of course, briefly flirted with the same figure – a rather vulgar display, really – but at present, Alphabet and Nvidia are the only members of this exclusive, if slightly tiresome, club.

The stock is up a frankly astonishing 136% from its recent nadir. Last August, when the market cap hovered around the $2.5 trillion mark, I ventured the prediction that it would surpass $3 trillion before 2027. A perfectly reasonable assessment, as it turns out. It seems I underestimated the current momentum. One now suspects it has rather more steam left in it, potentially pushing it toward the $5 trillion territory before the year is out. One hopes it doesn’t become too ostentatious, naturally.

Blowing Past Three Trillion – A Matter of Valuation

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The Gemini Effect – A Rather Clever Stroke

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But it’s not solely Gemini that has investors intrigued. Alphabet’s custom-made Tensor Processing Units (TPUs), developed in partnership with Broadcom, offer a viable alternative to Nvidia and Advanced Micro Devices’ graphics processing units. Because TPUs are application-specific, they’re designed for precisely the AI workloads they’ll encounter. By sacrificing some flexibility, they deliver cost advantages in data center applications like AI training and inference. GPUs, of course, remain the workhorses of AI data centers – one shouldn’t be unduly dismissive.

Thus far, Alphabet has been installing these TPUs in its own data centers, but there’s potential to begin selling them to other hyperscalers, creating an additional AI-fueled revenue stream. A rather sensible proposition, wouldn’t you agree?

The Road to Five Trillion – A Reasonable Expectation

With a price-to-earnings ratio of 33.4, Alphabet is no longer a bargain, naturally. But it’s definitely fairly valued, given the growth potential of Gemini, YouTube, and Google Cloud.

Assuming a reasonable valuation, it’s logical to expect the stock price to increase in line with earnings growth. If Alphabet manages 10% to 15% annual earnings growth over the next two years – and the stock price mirrors that – it could easily push the market cap above $5 trillion. A perfectly achievable goal, one suspects.

All told, Alphabet is a solid investment – one that investors can acquire today and build their portfolios around, even at its current, rather elevated, price. A bit of prudence, of course, is always advisable. But one wouldn’t entirely dismiss the possibility of further gains.

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2026-01-16 16:43