TLDR
- Investment advisor Ross Gerber called Alphabet stock “inexpensive” compared to other AI mega-cap peers despite its $2.58 trillion market cap
- Meta signed a six-year, $10 billion deal to run AI models on Google Cloud, following similar partnerships with OpenAI
- Alphabet announced $9 billion investment in Virginia data centers and $25 billion commitment to AI infrastructure across PJM grid
- Google’s forward P/E ratios of 22.12-22.17 are lower than most tech peers like Nvidia (39.06) and Microsoft (32.79)
- Google Cloud revenue jumped 31% year-over-year to $13.62 billion in Q2, with total revenue hitting $96.43 billion
Meta Platforms just handed Alphabet a massive vote of confidence. The social media giant struck a six-year, $10 billion deal to run its AI models on Google Cloud. This partnership comes at a time when tech companies are scrambling to secure the best AI infrastructure.
Ross Gerber thinks Alphabet stock is flying under the radar. The investment advisor called Google “very inexpensive relative to AI mega cap peers” on Monday. He pointed to YouTube, Waymo, and Gemini as key assets that make the stock attractive.
Alphabet currently holds a $2.58 trillion market cap. That makes it the world’s fourth most valuable company behind Nvidia, Microsoft, and Apple.
The Meta deal isn’t happening in isolation. Alphabet has been pouring money into AI infrastructure at breakneck speed.
Last month, Google announced a $9 billion investment in Virginia. The money will build and expand data centers across three counties. In July, the company committed another $25 billion to data center and AI infrastructure across the PJM grid.
Google also closed a $2.4 billion deal with AI startup Windsurf. The company hired the startup’s CEO and key engineers as part of the acquisition.
Cloud Wars Heat Up
Meta’s partnership with Google Cloud follows a similar deal with OpenAI. Both companies chose Google despite having strong ties to other cloud providers. This signals a shift in how companies think about cloud computing.
The move makes sense for Meta. The company is ramping up record capital expenditures on AI infrastructure. Meta recently invested $14.3 billion in Scale AI, a data-labeling startup. The company also launched Meta Superintelligence Labs to push beyond traditional language models.
Multicloud strategies are becoming the norm. Companies want flexibility and don’t want to be locked into single vendors. For Meta, Google Cloud provides specialized AI capabilities that complement its existing infrastructure.
Oracle also announced plans to integrate Google’s Gemini AI models into its cloud platform. These partnerships strengthen Google Cloud’s position against Amazon Web Services and Microsoft Azure.
The financial results back up the strategic moves. In Q2, Alphabet reported $96.43 billion in revenue, beating expectations. Google Cloud revenue jumped 31% year-over-year to $13.62 billion.
Valuation Looks Attractive
The numbers tell an interesting story about Alphabet’s valuation. Google’s forward P/E ratios sit at 22.12 for Class A shares and 22.17 for Class C shares. Those figures look cheap compared to other tech giants.
Nvidia trades at a forward P/E of 39.06. Microsoft comes in at 32.79. Amazon sits at 34.60. Even Apple trades at 29.15.
Tesla takes the valuation crown with a forward P/E of 178.57. That reflects sky-high growth expectations baked into the stock.
Analysts have mixed views on Alphabet’s near-term prospects. The consensus price target sits at $211.03 based on 34 analyst ratings. Recent ratings from Needham, Loop Capital, and Wells Fargo set an average target of $199. That implies potential downside of about 6.46%.
Stock performance has been solid but not spectacular. Alphabet’s Class A shares are up 12.4% year-to-date. Class C shares have gained 12.01%.
Meta has outperformed with a 23.27% gain. Nvidia leads the pack with a 25.88% increase. Microsoft has gained 21.05% while Amazon is up just 3.99%.
Apple and Tesla have struggled this year. Apple shares are down 4.80% while Tesla has dropped 11.97%.
The Meta cloud deal validates years of heavy investment in AI infrastructure. Google Cloud now has a multiyear, multibillion-dollar partnership that provides revenue visibility and market validation.
