Alphabet Inc (NASDAQ:GOOG) received a vote of confidence from Bank of America following its announcement of a breakthrough quantum computing chip, Willow.
The bank reiterated its “Buy” rating on Alphabet stock, citing the company’s sustained technological innovation and undervalued potential.
Shares of Alphabet were up 4.5% on Wednesday.
Earlier this week, Google unveiled its new Willow quantum chip designed to exponentially reduce error rates as additional qubits—quantum computing units—are added.
The breakthrough addresses one of the most persistent challenges in quantum computing: error correction.
Additionally, Willow demonstrated faster benchmark computation speeds compared to existing technologies, positioning Alphabet as a leader in quantum innovation.
While practical applications remain years away, Bank of America noted that the advancements signal Alphabet’s ability to create future technological moats in fields like artificial intelligence, drug discovery, and advanced materials.
Potential for long-term dominance
Bank of America analysts described Alphabet’s Willow quantum chip as a milestone achievement that reinforces the company’s status as a leader in next-generation technologies. “We remain constructive on Alphabet’s innovation and believe its products and capabilities are underappreciated in valuation,” the report stated.
Bank of America emphasized the strategic importance of Alphabet’s quantum computing advancements, noting that while Willow’s immediate commercial impact may be limited, its long-term implications are profound. The chip could significantly accelerate the training of foundational AI models and pave the way for breakthroughs in industries requiring high-performance computing.
The bank also highlighted Alphabet’s ongoing innovations in Tensor Processing Units (TPUs), which optimize AI workloads.
Bank of America believes these innovations, alongside Willow, could enhance Alphabet’s cost efficiency and competitive positioning in the AI landscape.
Analysts argue that Alphabet’s stock is undervalued. The bank estimated Alphabet’s core Google advertising and Play businesses are trading at just 13 times projected 2025 earnings, compared to the S&P 500’s 21 times multiple.
Bank of America set a price target of $210 for Alphabet, implying significant upside from its current levels.