Gemini success to drive Alphabet shares to $400, cause OpenAI to cut capex, says Pivotal
Google parent Alphabet has become an unstoppable force in artificial intelligence, according to Pivotal Research Group. Analyst Jeffrey Wlodarczak on Friday reiterated his buy rating on Alphabet, citing continued momentum in the company’s core business lines and saying that Google appears to be “winning everywhere” across the AI stack. Wlodarczak raised his price target to a Street high of $400 from $350, suggesting the stock has nearly 26% potential upside from its latest close. Analysts polled by LSEG have an average price target of $309.96, which suggests the stock could be overvalued after its recent run-up and dip more than 3%. Wlodarczak believes Google’s Gemini model could be a clear threat to OpenAI. He said he expects Gemini market share gains relative to OpenAI to continue growing at an accelerated pace and potentially “put OpenAI in jeopardy of having to pull back on capex” in 2026 given the scale of its commitments. Google’s latest AI model surpassed OpenAI’s ChatGPT on several key large language model metrics, leading Sam Altman earlier this week to declare a “code red” effort to improve ChatGPT as competition stiffens. “Google appears to be the best positioned of its peers to monetize AI investment internally and externally,” the analyst wrote in a note to clients. “Search is a resilient cash cow with pricing power, a powerful driver of GOOG’s best-in-class Gemini AI, with an opportunity to leverage AI [to] take massive costs out of the search business,” he continued. “We also highlight that as Gemini AI takes search share (mostly from itself) the shared economics with handset manufacturers are dramatically lower (Apple actually pays for access to Gemini) which also helps with search margin.” Alphabet shares have rallied 13% over the past month — far surpassing the performance of its “Magnificent Seven” peers over the same period — as investors have cheered the success of the Gemini 3 AI model and the company’s growing in-house chips business. The stock is up about 70% year to date. GOOGL 1Y mountain Google stock performance. In addition to its AI model capabilities, Google can leverage its advantages in AI and with its Tensor Processing Unit (TPU) chips to accelerate its cloud computing market share and profitability, Wlodarczak said. He added, the TPU chips are materially cheaper than Nvidia’s graphics processing units and cloud competitor GPUs. Google’s TPU business “still represents a massive opportunity with only 15-20% industry penetration of global workloads and this process is likely accelerated by the rising costs of servers (mainly due to material increases in memory costs),” he said.
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