Just six months ago, Alphabet Inc. investors feared the company could be a casualty of the artificial intelligence revolution. But after a trillion-dollar rally those concerns have flipped, and now the biggest worry is if the stock is getting too expensive for its own good.
Shares of the Google parent are up nearly 60% this year, making them by far the top performer among the Magnificent Seven technology giants. They’re also the second biggest point contributor to the S&P 500 Index’s roughly 15% gain in 2025, trailing only Mag Seven rival Nvidia Corp. The reasons for the rally include Alphabet’s progress in deploying AI products, strong growth in its cloud computing business and easing antitrust risks.
The enthusiasm has reached the point where even the notoriously tech-shy Warren Buffett’s Berkshire Hathaway Inc. bought a stake in Alphabet during the third quarter that was worth about $4.9 billion as of Nov. 14.
“In terms of stocks you want to own that are going to get a tailwind from the current economic conditions, I think Google is one,” said Brian Stutland, portfolio manager of the Rational Equity Armor Fund, which owns Alphabet shares. “The direction that they’re heading in is one that puts them at the top of the food chain in terms of this AI play.”
Alphabet shares have jumped over the past two weeks, bucking downturns in the S&P 500 and Nasdaq 100 indexes. They were the second biggest point gainer in the S&P on Wednesday after the latest version of the company’s Gemini AI model, which includes improvements in reasoning and coding ability, garnered applause from Wall Street. The stock gained as much as 4% in early trading in New York.
The rally has pushed Alphabet’s market valuation to historically pricey levels. The stock trades at 25 times forward earnings, a level it hasn’t hit since 2021 and well above its 10-year average of around 20 times.
“What kept the multiple lower in past years was the fact that everybody was always worried that they would have to be broken up into pieces,” Stutland said. “They’re emerging into like this new way of using AI technology and showing that they could maybe be the leader in that, which then kind of puts it on a different trajectory.”
The stock is still relatively cheap compared to the Bloomberg Magnificent Seven Index, which trades at 30 times forward earnings, with only Meta Platforms Inc. and Amazon.com Inc. having lower multiples. And it’s basically in line with the Nasdaq 100, a surprise considering it’s among the 15 best performers in the index for 2025.
Alphabet’s valuation suffered earlier this year due to worries about the dominance of Google’s position in the search business as ChatGPT became increasingly popular, according to Eric Gerster, chief investment officer at AlphaCore Wealth Advisory. But those concerns have abated thanks to Gemini’s progress.
“Around the middle of this year, there was a lot more analysis of what Google had done with Gemini, and I think a lot more evidence that it is a very strong large language model, that it has very good output and that they were much better positioned in AI than people felt even 12 months ago,” Gerster said.
“As the market’s gotten more confident that they’re still going to be dominant in search — I think the jury’s still out on that, but that’s where the market is today— the stock has come back and rallied,” he added.
Growth in other parts of Alphabet’s business have also helped assuage investor concerns and signaled that the company will be able to continue to report rising earnings. Its self-driving subsidiary Waymo announced this week that it’s introducing autonomous driving in five new cities including Miami, Dallas, Houston, San Antonio and Orlando, adding to a growing list of cities where it’s testing or planning to launch ride-hailing services. And its YouTube apps now have more than two billion monthly active users, which gives it a scaling advantage, according to Bloomberg Intelligence analyst Mandeep Singh.
Of course, with a multiple near an all-time high, investors may be skittish about taking on a new position in Alphabet right now. But the reality is this is a growth stock, meaning whether or not it’s considered a buy ultimately will be more reliant on its trajectory from here and the continuing enthusiasm for all of its businesses than the price of the shares at a given moment.
“Like a lot of these Big Tech stocks, valuation is probably not where you’re going to get upside going forward,” Gerster said. “It’s going to have to come more from proof in the delivery, in particular of AI.”
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