Google Is Secretly Winning the AI Race. Why I’d Buy Before Wall Street Realizes

Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) has been the odd one out in the Magnificent Seven for a while. The stock didn’t make parabolic gains, whereas most other AI stocks were on a rally that was truly deserving of the “Magnificent” title. And that’s to be expected for a company that just had a botched AI release (Bard) and its search engine was poised to be replaced by ChatGPT.

This never ended up happening. Google continued to improve. Microsoft (NASDAQ:MSFT), which integrated OpenAI’s AI models into Bing, actually saw traffic decline.

All that is old news today, and Google is increasingly looking like the company that is spearheading the AI space instead. It has top-of-the-line AI models when it comes to text, video, and audio. Google is still behind in certain areas, but it’s undeniable that it has leapt beyond most of its competitors, even though they had a head start.

Why nothing can replace Google

The biggest argument against Google today is that many think the search engine is still threatened. It’s a flawed argument, because most users have more to lose when they switch. Why? Google owns your browser’s search bar.

ChatGPT, or any other AI model for that matter, likely does not.

And this is a great arrangement for more users. For quick and reliable searches, there’s no alternative to Google. Navigating to an AI website and waiting for it to answer your query will never be as intuitive for the vast majority of searches. When things do get complicated, an AI model is of use.

Oh, and this space too is heavily contested by Google… It’s unlikely that many users will navigate to ChatGPT for most AI questions when Google’s AI overview model has you covered right from the search bar.

Google… the new Nvidia?

Calling Google the new Nvidia (NASDAQ:NVDA) is certainly a stretch, but the company has been moving briskly into the hardware space. Anthropic (the company behind Claude) announced it will be buying “up to one million TPUs” from Google.

“Google’s Tensor Processing Unit (TPU) is a custom-designed, application-specific integrated circuit (ASIC) used to accelerate machine learning (ML) workloads and other data-intensive tasks,” per Google’s AI handy overview.

Google’s custom TPUs are unlikely to replace Nvidia’s GPUs as they’re not as versatile. Plus, Nvidia controls some 80-90% of the AI market share today. Still, Google is clearly gaining traction with its AI hardware. No other AI company has such a robust AI software + hardware stack.

Financials are booming, and better than its competitors

Alphabet reported $102.3 billion in Q3 2025 revenue, up 16% year-over-year. This beat analyst estimates of $99.85 billion due to unstoppable cloud demand. It’s not just the top line that is doing well, as EPS grew 35% to $2.87.

AI companies are dumping their massive stashes of cash on the AI buildout. The trend only seems to be accelerating, and Google stands to be one of the biggest winners of this. It too has seen a decrease in cash from $119.95 billion in Q3 2023 to $93.23 billion in Q3 2024, though cash has started rising again. Cash was at $98.5 billion in Q3 2025.

The revenue growth and operating cash flow have accelerated enough to not only fund its massive AI infrastructure investments but also rebuild its cash reserves.

This makes Google quite unique, as both Microsoft and Meta Platforms (NASDAQ:META) have seen their cash balances decline. In fact, Meta no longer has a cash surplus due to the AI spending.

Microsoft could be a quarter or two away from losing its positive net cash position, too. The company has committed to spending even more than previously thought.

Google has spent some cash, but the buffer remains massive.

Why I’d buy GOOG/GOOGL stock hand over fist

GOOG stock is only starting to surge, but it has more room to run before it catches up. You’re paying 29 times earnings and 26 times forward earnings. Both align well with historical multiples, so you can’t call GOOG undervalued.

But if you slap an AI multiple on top of it, the stock can trade higher.

I believe GOOG stock has only just started to catch up to where it should have been all along.

The above chart is if Google 1. meets earnings expectations and 2. Wall Street holds the earnings premium at 28 times (minus non-recurring items). If Alphabet keeps beating estimates quarter after quarter, the market can pay 35-40 times earnings, which is what they pay for MSFT stock today.

In this case $400-450 is within reach a year out.