GOOG
The good news: AI is still the shiny object
Alphabet is getting the usual Wall Street split-screen treatment: one side says AI demand is a huge tailwind for ads and Google Cloud, the other side points at the giant grocery bill that comes with feeding all those models.
BNP Paribas’ Nick Jones stayed bullish, reiterating an Outperform rating and a $420 price target. The argument is pretty straightforward: Alphabet has the products, the scale, and the distribution to benefit if AI spending keeps flowing into search, advertising, and cloud.
The not-so-fun part: the spending tab
Here’s the catch. Alphabet also reiterated plans for a big jump in fiscal 2027 capital spending, which is Wall Street shorthand for: “Cool story, but how much is this going to cost?” More data-center capacity sounds great until depreciation starts doing jumping jacks in the background.
And that tension showed up in the stock. Shares were down more than 1% on Wednesday, even as the broader market was only slightly softer.
Why investors care
This is the classic megacap AI dilemma:
- growth is exciting
- margins can get messy
- and everyone wants the upside without the infrastructure hangover
That’s why Alphabet can get praised and punished in the same afternoon. If you own the stock, you’re basically betting that the AI payoff will outrun the capex bill.
Big picture: Alphabet still looks like a favorite in the AI race, but the market is reminding everyone that running an AI empire is not cheap.