SKN | Wells Fargo Upgrades Alphabet, Citing Expanding AI Compute Lead

Key Takeaways

• Wells Fargo upgraded Alphabet Inc. to Overweight.

• Price target raised to $387 from $354.

• Compute capacity projected to expand to 35GW by 2028, widening its lead over hyperscaler peers.

• Google Cloud growth forecasts lifted meaningfully above consensus.

Wells Fargo has turned more constructive on Alphabet, arguing the company is entering the next phase of artificial intelligence with structural advantages in data, distribution, and compute capacity.

Compute Capacity as the Differentiator

According to Wells Fargo’s capacity framework, Alphabet’s compute footprint is expected to expand to 35 gigawatts by 2028, up from roughly 15GW at year-end 2025.

The bank contends that hyperscaler ambitions across AI, cloud, and agent-based systems remain constrained by available compute resources. In that context, Alphabet’s accelerating infrastructure buildout could translate into durable competitive advantage.

Within its cloud business, Wells Fargo estimates compute capacity rising to 16.9GW in 2028 from 7.6GW in 2025. The implication is clear: infrastructure scale may increasingly determine AI market share.

Google Cloud Forecasts Move Higher

Wells Fargo significantly raised its growth expectations for Google Cloud. The firm now projects 2026 Google Cloud Platform revenue growth of 60% year over year, materially above consensus.

Forecasts for 2027 and 2028 also sit well above Street expectations, with operating income estimates running 10% to 15% higher than prevailing analyst models.

Stronger cloud profitability assumptions reflect both scale efficiencies and improved pricing leverage in AI-related workloads.

Gemini and Subscription Upside

The bank also highlighted monetization opportunities within Alphabet’s Gemini AI ecosystem. It projects Gemini could grow to $12 billion in annual recurring revenue from approximately $4 billion exiting 2025.

Beyond subscriptions, Alphabet’s distribution advantages across search, Android, and enterprise platforms provide multiple pathways for AI integration and monetization.

Wells Fargo further noted optionality linked to Apple’s Siri ecosystem, suggesting additional upside if deeper AI integrations materialize.

Search Competition and AI Transition

The AI-driven evolution of search remains a focal risk. However, Wells Fargo argues Alphabet has effectively stabilized competitive pressures from OpenAI, with search share dynamics appearing relatively steady since mid-2025.

The firm suggests search activity is now expanding rather than contracting, reinforcing the durability of Alphabet’s core franchise.

Outlook

Wells Fargo’s upgrade centers on one thesis: AI leadership will be defined by compute scale, proprietary data, and global distribution — areas where Alphabet maintains entrenched advantages.

If infrastructure expansion continues at the projected pace and cloud monetization outperforms expectations, Alphabet’s valuation could increasingly reflect its role not just as a search leader, but as a foundational AI infrastructure provider.

For confidential discussions regarding AI infrastructure investment themes, hyperscaler valuation modeling, and portfolio positioning within next-generation compute leaders, our senior advisory team is available for discreet consultation tailored to institutional and cross-border mandates.