Alphabet, the parent company of Google, is set to host a cloud event that could potentially have a positive impact on investor sentiment, especially in regards to the company’s artificial intelligence capabilities. This event comes at a crucial time for the tech giant as it aims to address concerns surrounding its AI potential and attract more market share. Wall Street analysts are closely watching the event for any announcements that could help differentiate Google Cloud and boost confidence in the company’s future prospects.
Alphabet has experienced a bumpy ride in recent times, with fluctuations in investor appetite and some AI-related mishaps. While the company’s stock has seen a 12% increase year-to-date, it is still lagging behind its major competitors such as Nvidia, Amazon, Meta Platforms, and Microsoft. Many analysts believe that Alphabet has the capability to weather the storm in the long run but acknowledge that short-term challenges may put pressure on the stock. The upcoming cloud event could be a turning point for Alphabet, potentially shifting sentiment towards its AI advancements and cloud offerings.
Analysts, including Bank of America’s Justin Post, are optimistic about the potential outcomes of Alphabet’s cloud event. They anticipate significant product announcements, including updates on the Gemini large language model, cybersecurity enhancements, tensor processing unit capabilities, and AI features geared towards improving workplace productivity. These announcements could help alleviate concerns about Alphabet’s AI capabilities and drive positive sentiment among investors.
Post believes that positive developments in AI infrastructure, Gemini’s capabilities compared to competitors, and traction with AI customers could address the overhang on Alphabet’s stock. The introduction of new Arm-based custom server chips and the overall growth of the cloud segment could also serve as positive drivers for the stock. Post estimates that Google Cloud revenues could reach $41 billion this year and $58 billion by 2026, with margins potentially jumping to 13%. These figures signal substantial growth potential for Alphabet, with cloud revenues expected to contribute significantly to the company’s overall revenue.
In light of the upcoming cloud event, analysts like Brian Nowak from Morgan Stanley view Alphabet’s stock as having significant upside potential. Nowak highlights the event as one of five potential catalysts for the stock in the coming months, emphasizing the importance of demonstrating how the cloud is benefiting from AI transformation. He anticipates strong performance from Alphabet this Spring, potentially resulting in better-than-expected top-line growth and EBIT beats. Nowak rates Alphabet shares as overweight with a price target of $165 per share, representing a more than 6% upside.
The cloud event hosted by Alphabet holds the potential to reshape investor sentiment and boost confidence in the company’s AI capabilities and cloud offerings. By addressing concerns and showcasing advancements in AI infrastructure, Alphabet may be able to position itself as a leader in the tech industry. Analysts are optimistic about the outcomes of the event and are closely monitoring any announcements that could impact the company’s stock performance. As Alphabet navigates through challenges and capitalizes on opportunities, the cloud event could serve as a critical turning point for the company’s future growth.