Google's Stock Popped: The Real Reason Why

So, Alphabet’s stock pops almost 3% on a Friday and suddenly Wall Street is ready to roll out the red carpet and declare the AI wars over. Why Alphabet Stock Popped Today? Anthropic, another AI darling, announced it’s going to use a boatload of Google’s custom chips—their "Tensor Processing Units"—to power its Claude AI. The market hears "AI" and "Google" in the same sentence and the Pavlovian response kicks in. The little bell rings, and the traders start drooling.

I watched the ticker climb and just had to laugh. It's the perfect encapsulation of the tech world in 2024: a press release moves billions of dollars, fundamentals be damned. You don't even have to build a revolutionary product anymore. You just have to rent your tools to the guy who might build a revolutionary product.

It’s a great deal for Anthropic, I guess. But for Google? They’re essentially becoming a high-tech landlord, leasing out server space. It’s a completely different buisness than what made them a behemoth. And everyone just nods along because the AI hype train is leaving the station and...

The Analyst Hype Machine Kicks In

Of course, you can't have a stock bump without an analyst somewhere raising a price target to justify it. Enter Aaron Kessler from Raymond James, who jacked his target on Alphabet up to $275 a share. He says he's "incrementally more bullish on search revenues."

Let's translate that from Wall Street-speak into English. "Incrementally more bullish" means "I'm guessing a little bit harder than I was yesterday that they'll sell more ads." Groundbreaking stuff.

Kessler’s big argument is that Alphabet is trading at a "30% discount vs. AI Winners" like Nvidia and Microsoft. This is the kind of logic that makes my head hurt. It's like saying a guy who owns a parking garage should be valued the same as a Formula 1 team because they both deal with cars. Nvidia makes the picks and shovels for the AI gold rush; they have a near-monopoly on the essential hardware. Google is just one of many, many prospectors hoping to strike it rich, and now they're also renting out shovels on the side. These are not the same thing.

Are we really supposed to believe that any company with a ".ai" in its mission statement now gets to be valued with the same insane multiples as the one company that actually builds the silicon? It’s a shell game, and right now, everyone’s pretending they can’t see the pea.

Let's Talk About the Numbers Nobody Wants to See

Here’s the part of the story where the confetti settles and you’re left standing in a room with a sticky floor and a massive bill. When you look under Alphabet’s hood, the engine ain’t purring the way the stock price suggests.

The stock is trading at over 26 times earnings. For a company that analysts predict will grow at maybe 15% annually? That's steep. That's paying a premium for, at best, average growth for a company of its size. This isn't some scrappy startup with 100% year-over-year potential. This is a titanic, globe-spanning corporation.

But the real kicker, the number that should have everyone hitting the brakes, is the free cash flow. This is the real, actual cash a company generates, not the accounting fantasy of "GAAP earnings." For every dollar of so-called profit Alphabet reports, it's only producing about 58 cents in cold, hard cash. That’s a massive gap. It tells me the quality of their earnings is, to put it mildly, questionable.

So when I see this, Alphabet isn't a "buy" for me. It's not even a "hold." It's a "stay the hell away." No, "stay away" isn't strong enough—it's a flashing red light, a warning sign that the market is chasing a narrative, not a result.

Then again, maybe I'm the crazy one. Maybe free cash flow is an outdated concept and all that matters is how many times a CEO can say "AI" on an earnings call. What do I know? I just think that when you pay for a steak, you should get a steak, not just the sizzle.

So We're Just Pretending Fundamentals Don't Matter?

Look, I get it. AI is the future, and nobody wants to be the fossil who missed the boat. But this blind euphoria around anything AI-adjacent has turned the market into a casino where the house is pumping in laughing gas. A deal to rent out servers sends the stock soaring while poor cash flow and a bloated valuation get completely ignored. It’s a collective delusion. We're celebrating a company for leasing out its hardware while its core financial health shows serious cracks. This isn't investing; it's just a greater fool theory playing out in real-time.