Alphabet’s Strategic Surge: AI and Autonomous Driving Ambitions Fuel Investor Confidence

Alphabet Inc. is making a substantial and clear financial commitment to solidify its leadership in artificial intelligence and autonomous vehicle technology. A potential multi-billion dollar funding round for its Waymo unit, alongside upward revisions in analyst price targets and significant infrastructure investments, paints a picture of a conglomerate aggressively scaling its most ambitious projects. This raises a pivotal question: how does this expansive investment phase support the company's current market valuation?

Beyond software, Alphabet is heavily investing in the physical infrastructure required to power its AI future. On December 17, Hut 8 announced the signing of a 15-year lease agreement for a 245-megawatt AI data center at the River Bend site, with Google providing financial assurances for the initial lease term. The total value of this agreement is estimated at $7 billion, with the potential to reach up to $17.7 billion if all extension options are exercised. This deal is a cornerstone of Alphabet's strategy to secure the immense, long-term computing capacity necessary for advanced AI applications.

The company's robust financial health enables such ambitious moves. For the third quarter of 2025, Alphabet reported revenue of $102.35 billion, a 16% year-over-year increase that surpassed expectations of $99.9 billion. Earnings per share came in at $2.87, significantly higher than the consensus estimate of $2.29. However, these gains are balanced against substantial capital expenditure. Planned CapEx for 2025 has been raised to a range of $91 to $93 billion, a factor that materially impacts free cash flow calculations.

Waymo: A Pivot from Cost Center to Value Driver

A major catalyst for renewed investor optimism is the reported progress at Waymo. The autonomous vehicle subsidiary is reportedly close to finalizing a new funding round exceeding $15 billion. This injection is expected to value Waymo between $100 and $110 billion—more than double its $45 billion valuation from the October 2024 funding round. Alphabet is anticipated to supply the majority of this new capital, signaling unwavering belief in its "Other Bets" segment. Concurrently, Waymo has outlined plans to expand its robotaxi services into over a dozen additional cities by 2026.

This potential revaluation is critical. A $100 billion valuation would retrospectively justify years of heavy investment in autonomous driving, transforming Waymo from a perceived cost center into a tangible, high-value asset within Alphabet's portfolio.

Analyst Sentiment: Revised Models Reflect AI Monetization

Market analysts are concurrently adjusting their financial models to account for Alphabet's accelerating initiatives, creating a confluence of positive signals.

Should investors sell immediately? Or is it worth buying Alphabet?

• TD Cowen has raised its price target from $335 to $350, reaffirming a "Buy" rating. Analyst John Blackledge now projects that the Gemini AI assistant will reach approximately 850 million monthly active users by the end of 2025, a substantial increase from his prior forecast of 600 million.
• BMO Capital Markets has set a new price target of $343, citing the accelerated growth of the Google Cloud division. Their estimates now call for 39% revenue growth in Q4 2025 and 40% in Q1 2026, driven by enterprise demand for AI agents and models like Claude.

These revisions highlight the growing confidence in Alphabet's ability to monetize its broader AI ecosystem, a narrative that dovetails with the advancing prospects at Waymo.

Market Performance and Prevailing Concerns

Alphabet's stock has rewarded this strategic focus in 2025, outperforming the broader market. In European trading, the share price, recently at €262.40, stands approximately 42% above its level at the start of the year and remains well above its 200-day moving average. This strength has been supported by a fading of regulatory overhangs, most notably the September decision not to break up Google, and the successful translation of AI search features into revenue.

Nevertheless, some caution persists. A recent downgrade to "Hold" by Gravenhurst Capital points to Alphabet's forward price-to-earnings ratio of around 30, which some investors may view as a valuation ceiling.

The Road Ahead: Execution is Key

Looking forward, investor attention will center on two critical execution points. First, the operational rollout of Waymo's planned robotaxi service expansion in 2026. Second, the speed and breadth of Gemini's integration into advertising products and other core offerings.

From a technical perspective, the stock is trading near its 52-week high and above key long-term averages. In U.S. dollar terms, the $310 area represents a near-term technical level. A sustained breakout above this threshold, fueled by tangible progress in Waymo's expansion and AI revenue streams, would provide fundamental support for the recently elevated analyst price targets in the $340 to $350 range.