Here's Why Alphabet Shares Popped Today (And Why Investors Have High Hopes for the Upcoming Results)
Key Points
Alphabet's AI and cloud businesses continue to drive growth and investor optimism.
Anthropic's deal with Google boosts confidence in Google's AI capabilities.
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Shares in Google-owner Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) rose by 3.3% by 12:30 pm today. The move comes after an analyst at a heavyweight company, Citi, placed the company on a "90-day catalyst watch" and raised the price target to $405 from a previous target of $390.
Positive news coming for Alphabet?
The analyst is clearly expecting good news from Alphabet's forthcoming earnings report on April 29 , not least because current trading appears strong and the company may report product upgrades as well.
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Alphabet retains a dominant position in search, and Google Cloud is fast-growing into a major profit center for the company, contributing almost 15% of operating income in the last reported quarter. While there are question marks around Waymo (reported in Alphabet's "other bets" businesses) and its path to profitability amid potential cost-competitive pressure from Tesla, Alphabet is favored by equity and bond analysts alike as one of the best ways to profit from the AI revolution. The mammoth cash flows from search and other Google services ensure the company can meet its AI spending commitments.
AI-related growth
Moreover, its AI capabilities were boosted by the recent news that leading AI player Anthropic had signed an agreement to buy computing power from Google's Tensor Processing Units (TPUs), its AI accelerators developed to speed up workloads. Google uses them internally, but the Anthropic deal opens the possibility of more deals and strengthens Google Cloud's market position, while also supporting the development of future TPUs. If Citi's analyst is correct, Alphabet's management may soon have more positive developments to report.
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Citigroup is an advertising partner of Motley Fool Money. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool has a disclosure policy.
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