AI improves search experience, Wall Street is crazy about "liking" Alphabet (GOOGL.US, GOOG.US) and sees its 26-year growth prospects.

As artificial intelligence continues to enhance the utility of search tools, analysts covering Alphabet Inc. Class C, the parent company of Alphabet (GOOGL.US, GOOG.US), are increasingly optimistic about the company's stock price prospects for 2026. Several investment banks point out that AI is driving increases in search query volume and user engagement, providing a tailwind for Alphabet Inc. Class C's search business in the medium to long term. On Wednesday, Citizens analyst Andrew Boone raised Alphabet's target price from $340 to $385, implying about a 22% increase over the previous closing price of $313.85 on Tuesday. Boone stated in his research report that AI search is a short-term positive for query volume growth, and more importantly, the continuous iteration of new models is improving answer relevance, further boosting user engagement. Recently, other analysts have also given positive assessments, focusing on the addition of tools like AI Mode and AI Overviews, as well as the release of Alphabet's latest AI model, Gemini 3. TD Cowen analyst John Blackledge gave Alphabet a "buy" rating with a target price of $350. In his report on December 12, he noted that the use of AI Mode and Overviews is continuing to increase search engagement, and more ChatGPT users are beginning to use Gemini. Evercore ISI analyst Mark Mahaney similarly maintained an "outperform" rating with a target price of $325. In his report on December 11, he stated that AI innovation is creating a better search experience for users, likely translating into "sustained and robust search revenue growth." On April 8 this year, Alphabet briefly dropped to a 52-week closing low of $144.7. At that time, the market as a whole was falling due to concerns about President Trump's 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 views have clearly turned around. Boone noted that despite the increasing usage of AI search, the overall usage of Alphabet Inc. Class C remains "relatively stable." He believes that with AI Overviews and AI Mode covering more search categories and regions, Alphabet Inc. Class C has "several years of tailwinds" in terms of query volume growth. These tools allow users to ask more complex questions and efficiently present the required information at the top of search results, improving the overall experience. In terms of stock performance, Alphabet has already risen by 66% this year, significantly outperforming the S&P 500 Index, Nasdaq Composite Index, and Dow Jones Industrial Average. However, as optimism increases, valuations are also rising. Currently, Alphabet's stock price corresponds to a price-to-earnings ratio of approximately 27.9 times the expected earnings over the next 12 months, higher than the five-year average of 21.7 times. The market generally believes that whether AI can continue to growth in search and advertising revenue will be a key factor in determining whether its valuation can further expand.