Alphabet’s Defense AI, Chip, and Clean‑Energy Push Might Change The Case For Investing In Alphabet (GOOGL)

• In recent months, Alphabet has tightened its grip on generative AI through its Gemini platform, secured a major US Department of Defense GenAI.mil contract, advanced custom TPU development despite supply constraints, and agreed to acquire clean‑energy developer Intersect Power for about US$4.75 billion in cash plus assumed debt.
• These moves, alongside partnerships such as powering Samsung’s Galaxy AI and expanding Waymo’s robotaxi trials, highlight how Alphabet is tying together AI software, in‑house chips, and energy infrastructure to support the growing computing demands of its cloud and defense businesses.
• We’ll now examine how winning the GenAI.mil contract, alongside broader AI expansion, reshapes Alphabet’s existing investment narrative and risk balance.

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Alphabet Investment Narrative Recap

To own Alphabet today, you need to believe its heavy AI spending will translate into durable earnings from Search, YouTube, and Google Cloud, while it manages rising capital intensity and regulatory scrutiny. The GenAI.mil win, TPU push, and Intersect Power deal all reinforce the near term AI infrastructure catalyst, but they also sharpen the biggest current risk: that surging AI capex and dependence on ad-driven cash flows fail to offset higher depreciation and infrastructure costs.

Among recent updates, Alphabet’s agreement to acquire Intersect Power for about US$4.75 billion in cash plus assumed debt stands out, because it directly supports energy hungry AI data centers that underpin Gemini and Google Cloud. This move connects clean power to Alphabet’s AI and defense compute workloads, potentially strengthening the investment case around AI driven growth, but it also underlines how much capital the business is committing to support its infrastructure build out.

Yet while AI demand is exciting, investors should also be aware of rising capex and margin pressure that could...

Read the full narrative on Alphabet (it's free!)

Alphabet's narrative projects $512.6 billion revenue and $148.4 billion earnings by 2028. This requires 11.3% yearly revenue growth and a $32.8 billion earnings increase from $115.6 billion today.

Uncover how Alphabet's forecasts yield a $330.24 fair value, a 4% upside to its current price.

Exploring Other Perspectives

The 188 fair value estimates from the Simply Wall St Community span roughly US$171 to US$341 per share, reflecting very different expectations. Against this, Alphabet’s record AI focused capex plans raise clear questions about future profitability and invite you to weigh several contrasting views.

Explore 188 other fair value estimates on Alphabet - why the stock might be worth as much as 8% more than the current price!

Build Your Own Alphabet Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Alphabet research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free Alphabet research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Alphabet's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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