Alphabet Inc. reached a new all-time high on Tuesday, with its market capitalization surpassing $4 trillion. The company's stock has risen 136% from its 52-week low.
Less than a year ago, investors were discounting Alphabet's earnings due to concerns about its long-term growth path. Now, Alphabet commands a premium valuation thanks to rapid improvements with its Gemini large language model.
On November 18, Alphabet launched Gemini 3, an ultra-powerful chatbot that rivals ChatGPT and Claude. It received widespread favorable reviews. Gemini's success is partially responsible for a recent sell-off in Microsoft, which is heavily invested in OpenAI.
Alphabet has added $1.5 trillion to its market cap in less than five months. The company's custom-made Tensor Processing Units, designed in partnership with Broadcom, offer an alternative to GPUs sold by Nvidia and Advanced Micro Devices. These TPUs are designed to handle specific AI workloads and deliver cost advantages in data center applications.
Alphabet has been installing TPUs in its own data centers but may begin selling them to other hyperscalers. With a price-to-earnings ratio of 33.4, Alphabet is no longer cheap but is considered fairly valued based on the growth potential of Gemini, YouTube, and Google Cloud.
The Motley Fool Stock Advisor analyst team identified what they believe are the 10 best stocks for investors to buy now, and Alphabet wasn't one of them. The team noted that when Netflix made their list in December 2004, a $1,000 investment would have grown to $474,847. When Nvidia made their list in April 2005, a $1,000 investment would have grown to $1,146,655.
Stock Advisor's total average return is 958%, compared to 196% for the S&P 500. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia.