GOOGL Rally "Long Overdue," Gemini 3.0 & Cloud's Long-Term Prospects

Core Viewpoint - Alphabet has experienced a significant stock price increase of approximately 17% in the past week, surpassing Microsoft to become the third most valuable company by market capitalization, indicating a potential long-overdue rerating of the stock driven by both fundamental improvements and positive news flow [2][3][4]. Stock Performance and Market Position - The stock's upward movement began in late July and early August, primarily influenced by the outcome of a search monopoly case, which contributed to a reassessment of Alphabet's valuation [3]. - Recent developments, including the successful launch of Gemini 3, have alleviated concerns regarding competition from OpenAI, suggesting that Alphabet is regaining its competitive edge in the AI space [4][6]. Business Growth and Financial Outlook - Alphabet's advertising businesses, particularly YouTube and search, are expected to grow at a double-digit rate over the next two to three years, surpassing previous consensus expectations of mid to high single-digit growth [6]. - The cloud business is also showing strong performance, with significant cloud bookings reported in Q3 and expanding margins that are approaching those of competitors like Microsoft and Amazon [7]. Investment Sentiment - Berkshire Hathaway's substantial investment in Alphabet is seen as a validation of the company's fundamentals, especially given Buffett's cautious approach to high-growth tech stocks [9]. - The investment reflects confidence in Alphabet's ability to generate free cash flow and its relative valuation compared to historical and competitive benchmarks [9]. Competitive Landscape - Alphabet is positioning itself to challenge Nvidia in the chip market, with potential opportunities arising from partnerships, such as discussions with Meta regarding chip usage [10][11]. - While Nvidia currently holds a dominant market share, Alphabet is expected to capture a modest share in the custom silicon market, potentially reaching mid-single digits by the end of the decade [12][13].