Alphabet Inc's (NASDAQ: GOOG) (NASDAQ: GOOGL) innovation machine is revving up for 2025, and Wall Street has its eyes firmly set on the tech titan.
JPMorgan analyst Doug Anmuth is bullish on Alphabet's Google, citing a flurry of advancements in generative AI, technical infrastructure, and autonomous driving as key growth drivers for the year ahead.
"Google's accelerated pace of innovation is very evident into the new year with many significant recent product announcements," says Anmuth, who reiterates his Overweight rating and sets a shared price target of $232 for both GOOG and GOOGL shares by December 2025-increase of almost 20%.
Generative AI: Gemini 2.0 Steals The Show
Anmuth points to Google's leadership in AI as a cornerstone of its growth outlook. The recent rollout of Gemini 2.0, the company's latest large language model (LLM), exemplifies Google's innovation.
"Gemini 2.0 and its associated applications like NotebookLM and Jules showcase the company's ability to redefine the AI landscape," he notes.
Beyond LLMs, Google's infrastructure upgrades, including its sixth-generation TPU Trillium, are poised to strengthen its competitive advantage. The Willow quantum chip, launched in December, reflects Google's long-term vision. While its real-world impact may take time, Anmuth underscores its strategic importance: "Willow shows that Google is at the forefront of tech innovation and bolsters its long-term positioning."
Waymo: Shifting Gears Globally
Waymo, Alphabet's autonomous driving unit, is preparing to debut in Japan, marking its first international expansion. Collaborating with Nihon Kotsu and GO, Waymo plans to roll out in Tokyo by early 2025. "Waymo's partnership strategy in Tokyo highlights its ability to adapt commercialization approaches for different markets," Anmuth observes.
Safety remains a key differentiator for Waymo, as demonstrated by a recent Swiss Re study comparing Waymo's safety record to human drivers. "This is critical in increasing adoption of autonomous vehicles," says Anmuth, emphasizing the division's edge over competitors like GM's (NYSE: GM) Cruise, which recently scaled back its robotaxi operations.
Android XR: A Leap Into Extended Reality
Google is also stepping into the extended reality (XR) space with Android XR, a platform for VR/AR devices.
Partnering with Samsung, the company is creating an ecosystem for the next generation of computing. "We believe Android XR strengthens Google's competitive advantage by offering a new access point for Gemini-powered applications," Anmuth explains.
Regulatory Clouds Clearing?
On the regulatory front, Google's remedies proposal in the DOJ search distribution trial suggests a pragmatic approach.
"The proposal is narrower in scope and duration, signaling a potential for a more favorable resolution," says Anmuth. The analyst also notes that a change in administration could further improve the regulatory environment, easing concerns for investors.
Valuation Remains Compelling
Trading at approximately 18.5x estimated 2026 earnings, Alphabet's valuation is still attractive, especially compared to other mega-caps.
Anmuth highlights additional tailwinds, including potential buyback increases and operational efficiencies under CFO Anat Ashkenazi. "We project an 80-basis-point GAAP operating margin expansion in 2025, reaching 33%," he adds.
For investors, the story is clear: Google's focus on innovation across AI, infrastructure, and other areas highlights its drive to lead the industry.