As artificial intelligence continues to enhance the utility of search tools, analysts covering Google's parent company, Alphabet (GOOGL.US, GOOG.US), are growing increasingly optimistic about the stock's price prospects for 2026. Multiple investment banks have noted that AI is driving an increase in search query volume and user engagement, creating medium to long-term tailwinds for Google's search business. On Wednesday, Citizens analyst Andrew Boone raised his price target on Alphabet to $385 from $340, implying an approximate 22% upside from Tuesday's closing price of $313.85. In a research report, Boone stated that AI search is beneficial for near-term query volume growth, and more importantly, the continuous iteration of new models is enhancing answer relevance, thereby further boosting user engagement.
Recently, other analysts have also issued positive assessments, specifically highlighting the addition of features like AI Mode and AI Overviews, as well as the release of Alphabet's latest AI model, Gemini 3. TD Cowen analyst John Blackledge assigned an "Outperform" rating to Alphabet with a $350 price target. In his December 12th report, he pointed out that the usage of AI Mode and Overviews is consistently pushing search engagement higher, while an increasing number of ChatGPT users are also beginning to use Gemini. Evercore ISI analyst Mark Mahaney similarly maintained an "Outperform" rating with a $325 price target. In his December 11th report, he stated that AI innovation is creating a better search experience for users, which is expected to translate into "sustained and robust search revenue growth."
On April 8th of this year, Alphabet's stock hit a 52-week closing low of $144.70. At that time, the broader market was declining due to concerns about US presidential tariff plans, and Alphabet itself faced multiple pressures, including regulatory risks, rising AI infrastructure spending, and competition from AI search models like ChatGPT and Perplexity. Now, Wall Street's sentiment has clearly shifted. Boone noted that despite the rising usage of AI search, Google's overall usage has remained "relatively stable." He believes that as AI Overviews and AI Mode expand to cover more search categories and regions, Google has a "multi-year tailwind" for query volume growth.
These tools allow users to ask more complex questions and present the desired information more efficiently at the top of search results, thereby improving the overall experience. In terms of stock performance, Alphabet has surged 66% year-to-date, significantly outperforming the S&P 500, the Nasdaq Composite Index, and the Dow Jones Industrial Average. However, as optimism builds, valuations have also climbed. Alphabet's current stock price trades at a forward price-to-earnings ratio of approximately 27.9 times next twelve months' estimated earnings, above its five-year average of 21.7 times. The market widely believes that the key determinant for further valuation expansion will be whether AI can consistently translate into growth for search and advertising revenue.
