Goldman Sachs Group Inc (NYSE:GS, ETR:GOS) expects Alphabet Inc (NASDAQ:GOOG)’s accelerating investment in artificial intelligence to power long-term growth across its core businesses, raising its price target on the Google parent to $234 from $225 following a strong second-quarter earnings report.
The bank said Alphabet’s latest results demonstrated continued strength in its Search, YouTube, and Cloud segments, but emphasized that the company’s evolving AI strategy will be the main driver of value going forward.
“Looking long-term, we continue to view Alphabet as well-positioned against both the current (mixture of desktop and mobile utility) and potential future (AI/ML; personalization; lowered friction to applications) computing landscapes,” Goldman analysts wrote.
Goldman sees Alphabet’s ramping capital expenditures — with 2025 spending now expected at $85 billion and 2026 projected to rise 15% to $102 billion — as a sign of commitment to scaling its AI platforms. While those figures raise questions about long-term returns, the analysts said they remain supportive of the spending as Alphabet shifts from AI infrastructure to monetizing platforms and applications.
The firm also pointed to Alphabet’s multi-surface approach to AI — including AI Overviews, Gemini, and multimodal search — as a source of potential differentiation amid rising competition. Notably, management confirmed a capacity-sharing relationship with OpenAI, a company often seen as both a collaborator and rival in AI development.
In YouTube, Goldman sees an opportunity for more transparency around the performance of Shorts and subscriptions, which could help the business stand out against traditional media peers. Alphabet’s Cloud unit, meanwhile, is expected to benefit over the medium and long term from expanding generative AI demand, even as short-term capacity constraints persist.
Looking ahead, Goldman is watching for developments from two upcoming events: a US court ruling in the search antitrust case expected by the end of August, and Google’s Pixel launch on August 20, which may reveal further details about how its AI tools will be integrated into hardware and search products.