Barclays Reiterates Overweight on Alphabet, $425 PT
Barclays analyst Ross Sandler reiterated an Overweight rating and $425 price target on Alphabet (NASDAQ: GOOGL).
“Google is about to kick off one of its largest new business models with the help of several partners, to increase AI capacity industry-wide.
Most investors are aware of TPU aaS given the commentary on the recent earnings call, but the magnitude of how big this effort could be is likely underappreciated by the Street.
Semiconductor buysiders have a decent handle on this theme, but we think now is the time for the consumer internet buyside to take notice.
TPU-aaS is where Google takes inventory and sells TPUs directly to customers as a merchant vendor.
One only has to look at the $811B (up +$479B Q/Q) in purchase commitments buried in the 10-Q this week, the $275B+ increase in backlog in the past 6 months, or AVGO’s commitment of 20+ GWs, to start to see how massive this could be.
We are raising our Google Cloud revenue and OI estimates significantly with this report, after a full rebuild of our model.
We’d also point out that this effort may reverse some future capex growth (potentially downside to our $500B ’28 estimate), as this asset-light approach to AI infrastructure helps GOOGL’s capital efficiency.”
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