Alphabet is trading like it lives in its own universe right now, and investors are trying to figure out how the stock got so far ahead of its fundamentals.
The company’s market value has shot up after a trillion‑dollar rally, flipping the script from six months ago when people were worried Alphabet could get wrecked by the AI wave. Now the fear is the opposite: the stock might be too damn expensive for what it actually is.
Shares are up 55% this year, making Alphabet the strongest name in the Magnificent Seven and the second‑largest point driver behind Nvidia in the S&P 500’s roughly 13% gain in 2025.
Brian Stutland from Rational Equity Armor Fund said his fund owns Alphabet because of the economic backdrop. In his words, “In terms of stocks you want to own that are going to get a tailwind from the current economic conditions, I think Google is one.”
He added that Alphabet’s direction puts it “at the top of the food chain in terms of this AI play.” The stock has climbed over the past two weeks, even while both the S&P 500 and Nasdaq 100 slipped.
It became the second‑biggest point gainer in the S&P on Wednesday after Alphabet rolled out a new version of its Gemini AI model with better reasoning and coding skills, prompting fresh cheers from Wall Street.
Alphabet valuation climbs beyond historic norms
Alphabet now trades at 25 times forward earnings, a level it hasn’t touched since 2021 and way above its 10‑year average of about 20 times. Stutland said the multiple used to sit lower because investors worried regulators might break the company apart.
He said Alphabet is shifting into a “new way of using AI technology” and showing it could even be the leader, which he believes places the stock on a new path.
Even with the climb, Alphabet is still technically cheaper than the Bloomberg Magnificent Seven Index, which trades at 30 times forward earnings.
Only Meta and Amazon have lower multiples. Alphabet is priced roughly in line with the Nasdaq 100, which is surprising because Alphabet is one of the 15 best performers in the index this year.
Earlier this year, Alphabet suffered from doubts about Google Search as ChatGPT gained traction. Eric Gerster, chief investment officer at AlphaCore Wealth Advisory, said those fears faded as Gemini improved.
He said that by mid‑year, people were taking a harder look at Gemini and saw “a very strong large language model” with strong output. He added that Alphabet looked better positioned in AI than many believed last year.
Alphabet expands across AI, autonomous driving, and YouTube
Gerster said the market warmed up again once confidence returned that Google would stay dominant in search. He added, “The jury’s still out on that, but that’s where the market is today.”Alphabet’s rally also got support from other parts of its business.
Waymo said this week that it will introduce autonomous driving in five more U.S. cities: Miami, Dallas, Houston, San Antonio, and Orlando. That expands the list of cities where it is testing or preparing ride‑hailing services.
YouTube also crossed two billion monthly active users, giving Alphabet a massive reach. Bloomberg Intelligence analyst Mandeep Singh said that kind of scale gives the platform an advantage that other players can’t easily match.
Investors are still cautious with the stock near an all-time high multiple. But Alphabet is a growth story, meaning the real bet is on future delivery, not today’s price.
Gerster summed it up clearly: “Like a lot of these Big Tech stocks, valuation is probably not where you’re going to get upside going forward. It’s going to have to come more from proof in the delivery, in particular of AI.”
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