Alphabet's 160% rally over a year reflects the value of owning 'most of the AI stack'

Alphabet stock has climbed roughly 160% over the past twelve months, ranking it among the strongest performers in the Magnificent Seven group. CNBC reports that investors are starting to price in the long-run advantage of owning almost every layer of the AI stack rather than just one.

Google's custom TPU chips, its in-house Gemini family of large language models, AI overviews embedded directly in Search, and Google Cloud's enterprise AI services together form a degree of vertical integration few rivals can match. Wall Street strategists argue this fortifies pricing power and margin against Amazon's AWS and Microsoft's Azure. Recent earnings showing that AI search has not yet dented advertising revenue have reinforced the bull case.

At the same time, analysts flag rising capital expenditure and ongoing antitrust scrutiny in the United States and Europe as the principal risks. Investors will watch upcoming quarters closely for signs of Cloud growth, Gemini monetisation in consumer products and the trajectory of capex relative to free cash flow.