Alphabet's Dual-Pronged Expansion: Powering AI and Scaling Autonomous Rides

Alphabet accelerates Waymo's multi-city expansion and locks in massive clean energy deals for data centers, fueling its AI and cloud ambitions as Wall Street raises targets.

This week, Alphabet is executing a synchronized strategy on two critical fronts: aggressively scaling its autonomous vehicle unit and securing massive energy capacity for its data centers. The moves underscore a clear corporate focus on dominating artificial intelligence infrastructure and broadening the commercial footprint of self-driving technology. However, the substantial capital required raises questions about the timeline for a return on these ambitious investments.

Analyst Confidence Bolstered by Compute Roadmap

Even before this week's operational announcements, Alphabet received a vote of confidence from Wall Street. On February 23, Wells Fargo upgraded the company's stock from "Equal-Weight" to "Overweight," lifting its price target to $387 from $354. Analyst Ken Gawrelski pointed to three key attributes of a potential "AI winner": customer data, distribution, and computing capacity.

The firm's research projects that Google's compute capacity will surge to 35 gigawatts by 2028, a significant jump from an estimated 15 gigawatts by the end of 2025. Furthermore, Wells Fargo raised its 2026 year-over-year Google Cloud revenue growth estimate to 60%, which stands 11% above the consensus view. The bank also forecasts that the Gemini subscription business could grow to $12 billion in annual recurring revenue, up from a projected $4 billion at the transition from 2025.

Waymo Accelerates with Multi-City Launch

In a landmark expansion, Waymo announced on Tuesday the launch of its fully autonomous ride-hailing service for selected users in four new U.S. metropolitan areas simultaneously: Dallas, Houston, San Antonio, and Orlando. This marks the first time the company has initiated operations in multiple new markets at once, bringing its total number of commercially served regions to ten.

The pace of growth is striking. Co-CEO Tekedra Mawakana stated that Waymo aims to reach over one million rides per week by year-end. Currently, the service handles more than 400,000 paid weekly rides across its six existing markets, which include Phoenix, the San Francisco Bay Area, and Los Angeles.

This expansion solidifies Waymo's lead in the North American autonomous ride-hailing competition against rivals like Tesla, Amazon's Zoox, and startups Waabi and Nuro. The unit also has considerable financial backing, having recently raised $16 billion at a valuation of $126 billion, according to CNBC, with Alphabet remaining the majority investor.

Securing Clean Energy for AI and Cloud Growth

Parallel to its mobility push, Google is locking in enormous power supplies for its expanding AI and cloud infrastructure. As reported by Reuters, the company has entered into separate power purchase agreements with AES Corp and Xcel Energy.

In Minnesota, Xcel Energy will power a new Google data center in Pine Island by adding 1,900 megawatts of new "clean" energy to the grid. The plan includes 1,400 MW of wind, 200 MW of solar, and 300 MW of long-duration storage. A standout component is a 30-gigawatt-hour iron-air battery system from Form Energy, described as the largest battery project announced to date by GWh capacity. Google is also investing $50 million in Xcel's battery storage network in the state. Xcel notes that Google will cover the costs for the new service, aiming to prevent additional charges for existing customers.

In Texas, AES and Google agreed to a 20-year contract to supply a new data center in Wilbarger County, including energy generation built in close proximity. According to CRN, Google has now contracted for more than 7,800 MW of net-new generation and capacity for the Texas power grid. These deals align with Google's plan to invest approximately $40 billion in cloud and AI infrastructure in Texas by 2027.

Market Performance and the Path Ahead

The market's reaction to these costly growth initiatives has been mixed in the near term. Over the past 30 days, Alphabet shares have declined by 5.80%, despite a strong 12-month gain of 58.28%.

The next significant test will be the quarterly results due in late April 2026. That earnings report is expected to provide clearer evidence on whether the heavy investment in computing power and the rapid scaling of Waymo are translating into tangible growth and improved profitability. The underlying logic is evident: more data centers enable greater AI capability, but they also drive higher power consumption and require substantial upfront capital that must eventually be justified by rising revenue.