Alphabet’s cloud event on Tuesday has the potential to significantly impact investor sentiment, particularly in relation to the search giant’s artificial intelligence capabilities. Amidst a challenging period for the company, characterized by dwindling investor appetite and AI mishaps, this event could serve as a much-needed boost for Alphabet.
Wall Street analysts, including Bank of America’s Justin Post, have highlighted Alphabet’s unique AI assets, such as proprietary infrastructure and an advanced LLM model. These assets position Google Cloud to differentiate its offering in the competitive cloud market, potentially increasing its market share and improving street sentiment.
Market Performance
While Alphabet’s shares have seen a positive trend this year, outperforming major U.S. stock indexes, the company still lags behind key competitors like Nvidia, Amazon, Meta Platforms, and Microsoft. Analysts believe that Alphabet has the potential to recover in the long run, but recent AI-related flubs are putting pressure on the stock in the near future.
The upcoming cloud event is anticipated to be a turning point for Alphabet, potentially shifting sentiment towards the company’s AI developments. Analysts are expecting a range of product announcements, including updates on Gemini, cybersecurity, the tensor processing unit capabilities, and AI features aimed at enhancing workspace productivity.
Post views the cloud segment as a significant growth driver for Alphabet, driven by accelerating AI demand and faster growth compared to the ad business. Rising margins in the cloud segment are expected to boost the company’s earnings per share, with Post estimating Google Cloud revenues to reach $41 billion this year and $58 billion by 2026, accompanied by a jump in margins to 13%.
In light of these growth opportunities, analysts like Post and Brian Nowak from Morgan Stanley have positive outlooks on Alphabet’s stock. Post maintains a buy rating on Alphabet with a price target of $173 per share, indicating upside potential of 11.7% from the previous close. Nowak, on the other hand, rates Alphabet shares as overweight with a price target of $165 per share, suggesting a potential upside of over 6%.
Alphabet’s cloud event has the potential to reshape investor sentiment towards the company, particularly in light of its unique AI assets and growth opportunities in the cloud segment. With the right product announcements and advancements in AI infrastructure, Alphabet could position itself for significant growth in the coming years. Investors may want to closely monitor the outcomes of this event as it could have a lasting impact on Alphabet’s stock performance.