Alphabet Emerges as the Defining Performer of 2025

Alphabet US02079K3059

As 2025 draws to a close, Alphabet stands unchallenged as the leading performer among the "Magnificent Seven" technology stocks. The parent company of Google has delivered a staggering year-to-date return of approximately 70%, significantly outpacing rivals such as Microsoft. This surge is largely attributed to the successful monetization of its artificial intelligence division. To sustain this competitive edge, management is now channeling billions into a strategic acquisition within the energy sector—a direct response to the insatiable power demands of its data centers.

The rally in Alphabet's shares is underpinned by exceptional operational results. In the third quarter, the company's revenue surpassed the $100 billion threshold for the first time, marking a 16% year-over-year increase. Its cloud unit, a primary beneficiary of the AI boom, saw revenue expand by 34% to $15.2 billion. Concerns that AI might cannibalize the core search business have so far proven unfounded. Instead, a positive reinforcement cycle is in play: the Gemini app now boasts over 650 million monthly active users. The stock currently trades near its all-time high of $313.56, which translates to a price-to-earnings (P/E) ratio of about 30.9—a premium that reflects the market's elevated growth expectations.

A Billion-Dollar Bet on Power Infrastructure

The driving force behind Alphabet's strategic moves is securing the physical infrastructure necessary for AI. The company recently confirmed the $4.75 billion acquisition of Intersect Power, a deal aimed squarely at addressing the industry's most critical bottleneck: electricity supply. This acquisition secures gigawatt-scale clean energy capacity specifically required to power computationally intensive AI models.

This move is a direct consequence of revised capital expenditure plans. Back in October, management raised its full-year 2025 capital expenditure (CapEx) forecast to a massive $91 to $93 billion. The market has interpreted these substantial outlays not as a cost burden, but as an essential foundation for securing future growth.

Waymo Navigates a Minor Operational Hurdle

Alphabet's autonomous vehicle subsidiary, Waymo, encountered a minor operational issue just before year-end. A power outage in San Francisco on December 20 led to traffic disruptions caused by immobilized robotaxis. The company responded promptly, issuing a software update the following Monday, December 23, to improve vehicle behavior during infrastructure failures. Despite this incident, analysts note that Waymo rides tripled in 2025, a sign they interpret as demonstrating technological maturity.

All eyes are now on February 3, 2026, when Alphabet is scheduled to release its fourth-quarter earnings. The key focus will be whether the immense infrastructure spending begins to pressure profit margins, or if the robust growth in the cloud segment continues to provide sufficient offset. Furthermore, the rapid integration of Intersect Power's assets is viewed as a critical factor for executing Alphabet's ambitious AI roadmap in the new year without delay.