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After a solid 58% gain in 2023, the upward momentum in Alphabet (GOOGL) stock continued in 2024. This year, shares of the tech giant have climbed over 35%, beating the S&P 500 Index’s ($SPX) 23% return during the same period.
However, it hasn't been smooth sailing. Earlier this year, Alphabet stock faced a rough patch as investor sentiment soured. Concerns emerged that the tech giant, once a pioneer of innovation, was beginning to lag behind in a rapidly evolving technological landscape. However, Alphabet’s recent announcements have flipped the narrative.
The company recently unveiled Gemini 2.0, the latest version of its flagship artificial intelligence (AI) model, alongside Willow, a breakthrough quantum chip. These developments showcase Alphabet’s leadership in both AI and quantum computing, reigniting investor enthusiasm and confidence in the company’s future.
Buoyed by this optimism, Alphabet stock recently hit a record high of $201.42. Wall Street analysts are also bullish, with at least one expert setting a $240 price target for the next 12 months. Let’s explore why.
Google: At the Forefront of Emerging Tech
Google’s progress in AI and quantum computing is a promising sign of its ability to stay ahead in an increasingly competitive tech landscape. Alphabet’s strategic investments and innovations could translate into significant returns as these technologies evolve.
Alphabet’s resurgence is particularly significant in AI, where it was perceived as losing ground to competitors like OpenAI. The latest and most advanced AI model delivers exceptional performance and broadens the scope of applications powered by the company’s technology. From enterprise solutions to consumer-facing tools, Alphabet is reinforcing its relevance and expanding its footprint across the AI landscape.
Meanwhile, Alphabet’s Willow chip is a groundbreaking development in quantum computing. The chip boasts significant progress in error reduction and achieves benchmark computations at unprecedented speeds. While quantum computing is still years away from widespread commercial use, Alphabet’s advancements highlight its commitment to long-term innovation and boost investors’ confidence in the stock. Willow serves as a testament to the company’s vision, laying the groundwork for future breakthroughs.
The synergy between its quantum, AI, and cloud capabilities promises transformative applications across industries, paving the way for new opportunities and reinforcing Alphabet’s standing as a leader in emerging technologies.
Catalysts for Alphabet Stock
Alphabet’s advertising revenues have shown resilience and growth despite macroeconomic challenges. Google’s ad revenues jumped 10.4% year-over-year in the third quarter despite tough year-over-year comparisons. Further, it marked the third consecutive quarter of double-digit growth. This growth reflects strong performance in its Search and YouTube ads.
Google Search advertising revenues rose 12% year-over-year in Q3, reaching $49.4 billion. Integration of Generative AI in Search, AI-powered overviews, and enhanced visual searches through Google Lens have improved user engagement and attracted more advertisers.
Similarly, YouTube ad revenues grew by 12% year-over-year, fueled by robust brand advertising and direct response campaigns. The platform’s expanding watch time and improvements in the monetization of YouTube Shorts have been significant growth drivers. Shorts, in particular, have shown remarkable progress in monetization, especially in key markets like the U.S., further strengthening Alphabet’s advertising revenue base.
Alphabet’s integration of AI into its advertising platforms and the introduction of new ad features position the company for growth.
Beyond advertising, Alphabet’s Cloud division is emerging as a significant growth engine. The Cloud business grew by an impressive 35% year-over-year in Q3, reflecting an acceleration in growth rate fueled by demand for AI-driven solutions. Key offerings like Google Cloud Platform and Workspace have been instrumental, with the former leading growth through infrastructure and platform services. Google’s AI infrastructure and generative AI solutions have generated billions in revenue this year alone, showcasing strong customer adoption.
The Bottom Line on GOOGL Stock
With the integration of AI in its Search business and growing YouTube engagement, Alphabet is poised to dominate the digital advertising market. Further, the acceleration in its cloud business augurs well for growth. These factors, along with improved investor sentiment, could push GOOGL stock to hit the $240 price target in 2025.
Analysts are optimistic, maintaining a “Strong Buy” rating on the stock. Furthermore, its AI and quantum computing advancements solidify its position as a tech powerhouse, making Alphabet stock an attractive choice for long-term investors.
