Alphabet’s $4 Billion Data Center and AI Expansion Drive Growth
TD Cowen recently raised its price target for Alphabet (NASDAQ: GOOG) stock to $280 from $270 while maintaining a Buy rating. The tech giant, with a market valuation approaching $3 trillion and trading near its 52-week high, continues to demonstrate solid financial health. Key highlights include a robust cash position and a notable 13% year-over-year revenue growth.
According to TD Cowen’s research note released Wednesday, Alphabet is expected to sustain double-digit growth in its Google Search segment alongside continued strength in its Cloud division. This assessment was reinforced by insights from TD Cowen’s third-quarter digital advertising expert call held on October 2, which confirmed that Google Search growth remains resilient despite prevailing macroeconomic uncertainties.
The firm’s forecast for Alphabet’s third-quarter net revenue suggests a 14.6% year-over-year increase, exceeding consensus estimates by 0.7%. Meanwhile, operating income and earnings per share projections (excluding the European Commission fine) stand 4% and 6% higher than market consensus, respectively.
Focus on Generative AI and Strategic Investments
Investors and analysts will closely monitor Alphabet’s ongoing generative AI initiatives, including the continued rollout of its AI Mode. While TD Cowen made minor adjustments to its long-term estimates, fiscal year 2025 projections remain unchanged.
Further strengthening Alphabet’s long-term growth potential is its recent announcement to build a $4 billion data center in Arkansas. This project, powered by Entergy Arkansas, will be the company’s first facility in the state and is expected to create hundreds of jobs. It represents one of the largest investments ever made in the region, underlining Alphabet’s commitment to infrastructure expansion.
Alphabet is also broadening the reach of its Google AI Plus subscription service to 36 additional countries, increasing its total availability to 77 countries worldwide. This expansion follows favorable feedback from early markets such as Indonesia.
Market Sentiment and Competitive Landscape
In related developments, HSBC initiated coverage on Alphabet with a Buy rating and a price target of $285, emphasizing the company’s comprehensive AI strategy as a core strength. Jefferies likewise raised its price target to $285, reaffirming a Buy stance grounded in Alphabet’s AI capabilities.
However, Alphabet faces emerging competition, notably from AI startup Perplexity, which recently announced that its $200-a-month AI browser will now be offered for free. This move could potentially impact Google Chrome’s market share, illustrating the intensifying competitive pressures in the tech sector.
