Alphabet's Breakout Potential: From Laggard to AI Leader

Alphabet (NASDAQ: GOOGL) hasn’t enjoyed the same spotlight as its Magnificent Seven peers for much of this year. While the broader market and other mega-cap tech names sprinted ahead in the first half, GOOGL spent that time lagging. But the tide appears to be shifting. 

The stock is up more than 42% from its 52-week low, has delivered better-than-expected Q2 earnings, and is starting to post stronger relative strength. Over the past quarter, GOOGL has gained more than 18%, outpacing not only many of its peers but also the overall market. Perhaps most tellingly, on Thursday, it was the only Magnificent Seven stock to close in positive territory. A sure sign of growing leadership.

Despite still being only up 5.5% on the year, the recent acceleration in performance, combined with a steady flow of meaningful catalysts, suggests Alphabet may be transitioning from laggard to leader in the second half of the year. Not only has GOOGL staged an impressive comeback, but it’s also building a strong vertically integrated pipeline of AI infrastructure, potentially resulting in renewed optimism from the street.

A Nuclear-Powered Future for AI

One of the most significant developments representing this has been Alphabet’s bold push into nuclear power to fuel its data centers. In a first-of-its-kind agreement, Alphabet, Kairos Power, and the Tennessee Valley Authority (TVA) will work together to supply 50 megawatts of nuclear power to data centers in Tennessee and Alabama. This partnership makes TVA the first utility to purchase power from a next-generation GEN IV reactor, while also marking the first deployment of Kairos’s Hermes 2 plant.

The agreement is not just a short-term solution. Kairos has a broader deal in place with Alphabet to deliver up to 500 megawatts of nuclear energy by 2035, with the Hermes 2 facility expected to boost its output to 50 megawatts beginning in 2030. For Alphabet, the move underscores the company’s commitment to sourcing reliable, clean, and scalable energy for its growing AI workloads. With AI data centers consuming enormous amounts of power, this deal not only addresses energy demand but also positions Alphabet as a leader in sustainable infrastructure innovation.

A $10 Billion AI Cloud Deal With Meta

Another catalyst driving momentum and partly explaining its short-term relative strength on Thursday was reports of a landmark six-year cloud services deal between Meta Platforms (NASDAQ: META) and Alphabet. The deal, reportedly valued at $10 billion, will see Meta tapping Google Cloud’s infrastructure for its AI workloads and related services.

This agreement is meaningful on multiple fronts. It highlights the growing demand for Alphabet’s cloud platform at a time when AI adoption is accelerating across industries. It also underscores the strategic importance of Google’s position within the broader AI ecosystem. By securing a partnership with a rival mega-cap, Alphabet not only gains a lucrative revenue stream but also reinforces its role as a critical enabler of generative AI innovation.

Cloud remains a key growth engine for Alphabet, and with deals of this scale, the segment could play a bigger role in driving top-line expansion in the years ahead.

Technicals Point to More Upside

From a technical perspective, GOOGL’s chart is beginning to flash bullish signals.

After spending much of the year in a sideways pattern, the stock has broken back into its late-2024 channel between $190 and $200.

It briefly pushed above $200 before pulling back, but rather than breaking down, it now appears to be forming a higher low within this new uptrend.

If the stock can reclaim $200 and sustain relative strength versus the broader market, it sets the stage for another leg higher.

A break above its 52-week high of $207.50 could open the door to fresh highs, particularly if the steady drumbeat of positive news continues. 

Combined with strong Q2 earnings, easing regulatory concerns, and consistent momentum, Alphabet looks well-positioned both technically and fundamentally.

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The article "Alphabet’s Breakout Potential: From Laggard to AI Leader" first appeared on MarketBeat.