'Alphabet' Joins $2 Trillion Club - and Might Overtake NVIDIA

Alphabet Inc.'s stock is on a remarkable trajectory toward one of its most outstanding performances in history on Friday, spurred by an earnings report that garnered enthusiastic praise from analysts.

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Shares of Alphabet, trading under GOOG and GOOGL tickers, surged by 10.0% in Friday morning trading. If this surge persists until the close of the regular trading session, it would mark the stock's most significant single-day percentage gain since it soared by 16.3% on July 17, 2015.

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The company is now poised to achieve a market capitalization of $2 trillion for the first time, provided the current gains hold. This achievement would position Alphabet as the fourth U.S. company to reach this milestone, following in the footsteps of Apple Inc., Microsoft Corp., and Nvidia Corp. If Alphabet attains this milestone on Friday, it would do so after 947 trading days since reaching the $1 trillion mark.

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Alphabet has also been closely approaching Nvidia's market capitalization. Based on its current stock price, Alphabet's implied market cap stands at $2.14 trillion, slightly edging out Nvidia's implied market cap, which saw a 3.3% increase, reaching $2.13 trillion.

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The reason behind this remarkable performance? According to Bernstein analyst Mark Shmulik, Alphabet delivered a "perfect" earnings report.

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Alphabet faced an intriguing scenario leading up to the report. While its shares were hovering near all-time highs, the company had been grappling with investor skepticism over factors such as its positioning in artificial intelligence and the future prospects of its core search business in an AI-dominated landscape.

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Shmulik, who maintains a market-perform rating on the stock, noted that the company's results were bolstered by accelerating growth in three key areas: search, YouTube advertising, and cloud services. The fears of losing search market share to AI were put to rest as it appeared that users of its generative AI search product ended up conducting more searches.

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Michael Nathanson, an analyst at MoffettNathanson, also emphasized the company's improved narrative in AI.

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Nathanson observed "a clearer pathway to monetization and cost optimization in AI initiatives," citing the "real momentum" witnessed in Google Cloud, which experienced a 28% growth in the quarter. The commentary on search patterns for generative AI users further solidified confidence in Alphabet's leadership in the conversational search-engine race, leveraging its dominance in Search.

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The robust revenue growth of Alphabet's search business, increasing by 14% in the latest quarter, is seen as further evidence of its ability to continuously defy the law of large numbers. Nathanson reaffirmed his buy rating and raised his price target from $175 to $185.

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Scott Devitt from Wedbush titled his note to clients: "Rumors of Alphabet’s Demise Greatly Exaggerated."

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"We think 1Q results further validate Google’s position as a leading AI beneficiary as management commentary directly addressed the structural risks of generative AI on the Search business," he wrote.

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Devitt also highlighted the increasing contribution to growth driven by AI in the cloud segment of Alphabet's business. Maintaining an outperform rating on the stock, he raised his target price from $175 to $205.

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