Google Has Made a Huge Comeback. Can Alphabet Maintain This Momentum?

Alphabet, Google’s parent company, has staged an impressive comeback in recent months. But with its stock surging to record levels, investors are beginning to ask whether the tech giant can maintain this pace.

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far in 2025, Alphabet shares have jumped nearly 33%, including a remarkable 22% surge over the past month alone. Since hitting a low in April, the stock has skyrocketed more than 72%. That momentum pushed the company’s market value past the $3 trillion threshold on September 15, making it only the fourth U.S. company to reach that milestone.

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Alphabet’s rebound has been powered by several key developments. A favorable court ruling in early September allowed the company to retain control of its Chrome browser, a major relief for investors.

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Around the same time, Google unveiled its new Nano Banana image-editing tool, which drove a spike in usage of its Gemini AI app. Cloud revenue growth has also accelerated, while interest has grown in Google’s custom-designed tensor processing units (TPUs). The company’s chips are gaining traction as it seeks to compete more directly with Nvidia in powering AI applications.

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Still, some analysts warn that the rally may have gone too far too quickly. According to LSEG data, Wall Street’s consensus price target now implies a 5% downside risk for Alphabet shares.

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While Gemini adoption is picking up, questions remain about how Google measures AI and Search activity. Melius Research analyst Ben Reitzes flagged concerns that AI-generated search summaries are delivering a weaker return on ad spending compared with traditional search results.

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“Google is doing better in Cloud, and Gemini subscriptions are climbing, but Search still faces challenges,” Reitzes wrote. “Ad checks suggest AI summaries aren’t generating the same value for advertisers. Alphabet deserves credit for its rally, but Microsoft still commands a premium.”

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One striking point is Alphabet’s performance relative to Microsoft. Over the past quarter, Alphabet stock has surged 41%, compared with just a 2% gain for Microsoft. CNBC data shows Alphabet’s 60-day outperformance versus Microsoft recently hit its highest level since January 2006.

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Reitzes argued this gap is unusual, especially given Microsoft’s strong June-quarter results and upbeat guidance for its Azure cloud unit. While Microsoft’s stock may be weighed down by uncertainty surrounding its long-term partnership with OpenAI beyond 2030, the company continues to benefit from booming demand for AI inference workloads on Azure.

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“Azure checks show no slowdown,” Reitzes noted, adding that Microsoft could deliver significant updates on AI agents and Copilot at its Ignite conference in November. He maintained a buy rating and a $625 price target on the stock.

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Despite caution from some corners, most analysts remain constructive on Alphabet. Of the 64 analysts covering the company, 52 rate it a buy or strong buy, according to LSEG data.

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Truist’s Youssef Squali reiterated his bullish stance, arguing that Alphabet continues to dominate search with over 90% market share, even as generative AI platforms gain traction.

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“Our analysis shows Google still controls the most valuable commercial queries, while AI search contributes only about 1% of total referral traffic and an immaterial share of conversions so far,” Squali wrote. “AI chatbots may actually expand search’s total addressable market rather than shrink it.”

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Other investors are also backing Alphabet for the long term. Dan Niles of Niles Investment Management told CNBC he believes Alphabet will ultimately produce the leading AI app, thanks to the unmatched amount of free data it collects through YouTube.

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Alphabet’s second-quarter results highlighted the scale of its AI ecosystem. CEO Sundar Pichai revealed that the company’s systems processed more than 980 trillion tokens per month in July, up sharply from 480 trillion in May. Tokens are the units of text that AI models process.

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Pichai also said Alphabet’s AI Overviews feature, which summarizes search results, now reaches about 2 billion monthly users across 200 countries. Meanwhile, the Gemini app has grown to more than 450 million monthly active users, underscoring the company’s growing foothold in AI.

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Wolfe Research analyst Shweta Khajuria named Alphabet one of her top picks through year-end, pointing to its steady ad revenue, rapid AI product rollouts, and expanding cloud market share.

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“Google continues to impress with its AI offerings,” she wrote in mid-September. “Its apps are climbing the store rankings, and with resilient ad spending and strong Cloud momentum, Alphabet remains a near-term favorite.”

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Even so, investors should be mindful of technical risks. Alphabet’s relative strength index (RSI) recently hit 75, signaling the stock is overbought. That leaves shares vulnerable to a pullback in the short term, even if the long-term AI growth story remains intact.

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