A year ago, Alphabet was the AI laggard.
Now it's neck-and-neck with Nvidia for the most valued firm on Earth. And one buyer is doing a lot of the lifting.
Alphabet briefly passed Nvidia by market cap in after-hours trade this week. Then Nvidia took the lead back.
The two now sit at $5.2 trillion and $4.8 trillion.
The trigger was a report. AI maker Anthropic plans to spend $200 billion on Google Cloud over five years. The deal covers 5 gigawatts of compute.
JPMorgan named Alphabet its "top overall pick" in tech. The bank pointed to a cloud backlog that almost doubled to $462 billion.
Mizuho also raised its price target. The firm said most Wall Street guesses still under-rate Google Cloud sales over the next two years. The same goes for cloud profit.
Among other trillion-dollar tech names, the next closest is Broadcom. It's up 107% over 12 months. Nothing else is close.
The bull case is simple. Gene Munster of Deepwater said Alphabet "owns most of the stack." By that he means chips, models, pipes, and reach. Munster put just one other firm in that group. That's Elon Musk's SpaceX, which merged with xAI in February. The combined deal was valued at $1.75 trillion.
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There's a catch. The $200 billion deal could be more than 40% of Alphabet's cloud backlog.
That setup looks all too familiar.
Oracle's stock soared in September after backlog jumped about 360%. Then it came out that nearly all of the bump was OpenAI. Oracle then lost about half its value over five months.
Gil Luria at D.A. Davidson said Alphabet "did it the same way Oracle did." His point: the firm shared the backlog without saying how much came from one buyer.
Microsoft has faced the same questions about its OpenAI ties.
The cash flow gets weird. Anthropic is a cash-burning startup. It's raised tens of billions from Google, then spent much of that money back at Google for cloud and chips.
Google's own AI chips are starting to matter. They're called TPUs, short for tensor processing units.
Mizuho thinks about $61 billion of cloud backlog through 2027 could come from TPU sales. Most of that revenue should hit next year.
That makes Google a way to bet on AI chips without buying Nvidia. AMD, Intel, and Micron stocks have all more than doubled this year on the same logic.
Google's capex this year is set to hit $190 billion. That's more than double last year.
Argus has a buy rating. The firm called Alphabet's ability to pay for that build-out versus rivals like OpenAI a "competitive advantage."
Google I/O kicks off in less than two weeks. Investors will watch for proof that AI sales can come from somewhere besides Anthropic.
Munster says the biggest risk is the stock already prices in big future gains. Nvidia, by contrast, is up just 15% this year despite huge growth. The market may treat Google the same way.
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