Why Alphabet Deserves a Spot Among Top Tech Companies to Watch in 2025

The technology sector is experiencing notable momentum this year, with the Nasdaq-100 climbing 21% compared to the S&P 500’s 15% gain. However, this rally has compressed valuations across most major tech names, with the broader Nasdaq-100 trading at approximately 39 times earnings. Alphabet stands out as a rare exception in this expensive landscape.

The Valuation Play

At 28 times earnings, Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is trading at a significant discount to the wider tech sector. This valuation gap becomes even more compelling when you examine what the company is actually delivering in terms of growth and innovation. As one of the top tech companies by market capitalization and influence, Alphabet’s relative affordability compared to its peers presents an intriguing opportunity.

AI Infrastructure and Products: Dual Revenue Streams

The original concern was that AI-driven chatbots would cannibalize Alphabet’s search dominance. Instead, the company has leveraged its scale and resources to build a comprehensive AI ecosystem. Google’s AI Overviews have amassed 2 billion monthly active users, while the Gemini application has reached 450 million monthly active users. These figures, disclosed during the company’s Q2 earnings presentation, demonstrate that AI isn’t cannibalizing search—it’s enhancing it.

Beyond consumer-facing AI products, Alphabet is capitalizing on enterprise demand for AI infrastructure. The recently announced partnership between Google and Anthropic is particularly significant. Under this cloud infrastructure agreement, Anthropic gains access to up to 1 million of Google’s custom-designed Tensor Processing Units (TPUs), in a deal valued at tens of billions of dollars. This arrangement accomplishes two strategic objectives: it creates a substantial recurring revenue stream, and it positions Google Cloud as a critical player in AI infrastructure—a market segment that remains highly fragmented.

Financial Strength Supports Growth

The company’s operational excellence is reflected in its financials. Alphabet generated $73 billion in free cash flow in the previous year, providing substantial dry powder for investments in AI, infrastructure, and potential shareholder returns. This cash generation capability distinguishes Alphabet from many competitors and provides confidence in its ability to fund multiple growth initiatives simultaneously.

The Broader AI Opportunity

Market research suggests that the artificial intelligence sector will expand at a compound annual growth rate of 37% through 2031. Given Alphabet’s diversified exposure to AI—through search enhancements, cloud infrastructure partnerships, proprietary chip design, and the Gemini ecosystem—the company appears well-positioned to capture significant value from this secular trend. Combining these AI advantages with its established advertising business, Android ecosystem, and Chrome browser creates multiple pathways for growth.

As one of the top tech companies positioned at the intersection of AI infrastructure, consumer AI adoption, and traditional search monetization, Alphabet offers a compelling risk-reward profile in the current market environment.