Why Alphabet Rallied Today

Shares of tech giant Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) rallied as high as 3.4% today, before retreating to a 2% gain as of 3:04 p.m. ET, still well ahead of the Nasdaq Composite.

Lots of technology names rallied today on the back of strong numbers out of Hon Hai Precision, which released very strong artificial intelligence (AI) server numbers for the month of December.

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However, Alphabet got an additional boost thanks to a positive note from a prominent Wall Street analyst.

J.P. Morgan likes Alphabet for 2025

On Monday, sell-side analyst Doug Anmuth at J.P. Morgan issued a positive note on Alphabet while retaining his buy rating on shares, with a $232 price target. Alphabet entered the day just over $193 per share, so Anmuth's target would amount to roughly 20% upside.

Anmuth believes Alphabet has established itself as a formidable player in AI, whereas this time last year investors were worried about how generative AI might disrupt the search business. However, Anmuth sees Alphabet as a driver of the technology and a beneficiary rather than victim of the AI revolution. Of note, Alphabet introduced its new Gemini 2.0 large language model last month, largely to a positive reception.

Anmuth sees the search business continuing to grow another 11% this year. Aside from search, Anmuth also sees underappreciated growth potential for Alphabet's cloud business as well as YouTube subscriptions. Finally, Anmuth pointed out that Alphabet's "other bets" segment, composed of moonshot projects like Waymo and Verily, may be seeing some of those bets actually come to fruition. He noted other bets revenue was up 43% in the first nine months of 2024 with almost no increase in operating losses, signaling some of those bets may be getting closer to profitability.

Alphabet is the cheapest of the Mag 7

Thanks to the Alphabet losing its antitrust ruling last year, its shares have been capped at a very cheap valuation of just 22 times this year's earnings estimates, the cheapest of the "Magnificent Seven." But Anmuth also touched on this topic in his note, saying that the Trump administration Justice Department may go for a less onerous penalty than the prior administration.

All in all, Alphabet remains one of the cheapest ways to play the AI revolution in 2025.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Billy Duberstein and/or his clients have positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and JPMorgan Chase. The Motley Fool has a disclosure policy.