Alphabet briefly passed Nvidia by market cap in after-hours trading this week as Wall Street kept rewarding a company that owns much of the AI stack, from chips and models to infrastructure and distribution. The stock rose about 160% in the past year, a surge driven by investor confidence in Google’s place across the AI landscape and by a cloud backlog that now looks less like broad demand than a tightly managed corporate loop.
Who Owns the Stack
Gene Munster, managing partner at Deepwater Asset Management, said, "Google is one of the two best-positioned AI companies because they own most of the stack. Chips, models, infrastructure and distribution. On top of that, they're nicely profitable." He said the other company in that category is Elon Musk's SpaceX, which merged with xAI in February in a deal valued at $1.75 trillion. The language of “best-positioned” and “stack” is Wall Street’s favorite way of describing concentration without saying concentration: a few firms controlling the machinery, the models and the channels everyone else has to pay to use.
Following Alphabet's earnings report last week, JPMorgan analysts called the stock their "top overall pick" in the tech sector, pointing to a "standout quarter," accelerating growth and a cloud backlog that nearly doubled to $462 billion. Mizuho analysts raised their price target, writing that consensus estimates still significantly underestimate Google Cloud revenue and operating income over the next two years. Alphabet closed the week with a market cap of $4.8 trillion, behind only Nvidia at $5.2 trillion. The two flip-flopped momentarily after markets closed on Tuesday following a report that AI model developer Anthropic committed to spend $200 billion on Google Cloud over five years for 5 gigawatts of compute.
The Backlog Machine
Google did not provide a comment for the story, pointing only to CFO Anat Ashkenazi's commentary on the last earnings call. Some analysts raised concerns about concentration risk, saying a large share of the backlog could come from Anthropic, a cash-burning and richly valued startup that is raising tens of billions of dollars from Google and, in turn, is spending much of that money with Google on cloud services and TPUs. That is the kind of circular arrangement the market loves to dress up as growth.
Gil Luria, an analyst at D.A. Davidson, said the setup is reminiscent of Oracle, which saw its stock soar in September after the company reported a backlog increase of almost 360%, only for investors to later realize most of that was from OpenAI. Luria said, "They did it the same way Oracle did. They told us their backlog roughly doubled without telling us that almost the entire increase came from one deal with Anthropic." He also said Microsoft, Oracle, Amazon and Google together have close to $2 trillion in reported cloud backlog, and nearly half of that traces back to commitments from OpenAI and Anthropic.
Munster said, "The deal underscores how early we are in AI. Even though the use cases are limited today, the need for compute is exponential. Google will ride that wave." He added, "The headlines about size and risk of any given customer miss the point. If one of those customers blows up, over time there will be dozens to take its place." That is the logic of the apparatus: risk gets socialized across the ledger, while the firms at the top keep the upside.
Compute, Chips, and the Next Round of Extraction
Where Google has a clear and emerging advantage is in custom silicon. Mizuho estimates roughly $61 billion of Google's cloud backlog through 2027 could come from sales of its TPUs, and most of that revenue will likely be recognized next year. That gives investors looking for an alternative to Nvidia another way to buy the AI hardware trade, a theme that has swept across Wall Street of late, with shares of Advanced Micro Devices, Intel and Micron all more than doubling this year.
Some of the demand that Google and Amazon, which makes Trainium, are seeing for their in-house chips is from their portfolio companies, according to Luria. Luria said, "When Google and Amazon talk up demand for their proprietary chips, much of that is captive demand. It's not organic." The demand is being manufactured inside the same corporate ecosystem that is selling the product, a neat little trick for keeping the machine fed.
Munster said the biggest threat to Google's continued outperformance is that the stock is already baking in future gains, likening that scenario to Nvidia, which continues to see huge growth but is no longer getting rewarded by investors. Analysts expect Nvidia to report 78% revenue growth later this month, according to LSEG, but the stock is only up 15% this year, slightly outperforming the Nasdaq. Munster said, "The biggest risk to owning Google is that they don't have an opportunity to change the narrative with investors." He said that puts increased weight on the company to impress at Google I/O, which kicks off in less than two weeks. Google needs to provide clarity on its agent strategy with Gemini and show that it can find sustainable revenue from the broader AI ecosystem.
Google has gone from AI laggard to infrastructure winner in short order and is projecting capital expenditures of up to $190 billion this year, more than double its capex for 2025. Analysts at Argus said in a report after earnings that "risks of Alphabet's capex spend are salient," but they have a buy rating on the stock and view the company's ability to afford those expenditures versus the likes of OpenAI as a "competitive advantage." In a separate report, CNBC noted that Paul Tudor Jones said the U.S. is late to regulating AI and said, "We should have already done it."