Alphabet, the parent company of Google, reached its highest share price ever on Tuesday, as it rides the wave of artificial intelligence to a historic valuation. The stock hit an all-time intraday high of $159.89 per share and closed at a record closing price of $158.14, gaining 1.3% despite modest broader market losses. This sent Alphabet’s total market value to $1.95 trillion, putting it within 3% of reaching a $2 trillion market capitalization, a milestone only achieved by a few companies including Apple, Microsoft, and Nvidia.
The recent surge in Alphabet’s stock price follows a 13% increase year-to-date and a 77% jump since the end of 2022. This rally has been driven by record profits due to strong advertising spending and investor optimism about the company’s potential to profit from AI. The market is betting on Alphabet’s future profit potential, with the company’s price to future earnings ratio at its highest level in two years. Wall Street analysts expect Alphabet to surpass the $2 trillion mark, with the average price target of $166 implying a $2.1 trillion market cap for the company.
Oppenheimer analyst Jason Helfstein is bullish on Alphabet, setting a price target of $185 ($2.3 trillion implied market cap) for Alphabet shares. His optimism is based on Google’s ability to thrive as its generative AI applications gain traction in search. Despite Alphabet’s impressive performance, it falls short of the annualized returns achieved by other American companies valued at over $1 trillion, including Amazon, Apple, Microsoft, Meta, and Nvidia. Google shares have seen a 19% annualized rate of return over the last decade, outperforming the S&P 500.
Alphabet’s stock performance reflects the market’s uneven reaction to its AI offerings, with sentiment improving as Google establishes itself as a top player in generative AI. Reports suggest that the company is considering charging for AI-powered search, which could further drive revenue growth. After a significant drop in its share price in 2022, Alphabet’s business rebounded as advertising spending remained stable, accounting for over three-fourths of Google’s total revenue. It will be important to watch for Alphabet’s first-quarter earnings report later this month, with average analyst forecasts predicting a record profit of nearly $19 billion.
In summary, Alphabet’s stock reached a historic high as it capitalizes on the potential of artificial intelligence. The company is on track to surpass a $2 trillion market capitalization, with analyst expectations and investor optimism driving its stock price to new heights. Despite its strong performance, Alphabet lags behind other tech giants in terms of annualized returns, but its focus on AI and stable advertising revenue position it well for future growth. As Alphabet continues to innovate and expand its AI offerings, the market will be watching closely for its upcoming earnings report and potential developments in this space.
