Is Alphabet a Top Artificial Intelligence Stock to Buy for 2026?

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has been one of the best big tech stocks to own in 2025. Its stock has risen 65% so far in 2025, outperforming nearly all of its big tech peers, like Apple, Microsoft, Amazon, and even Nvidia. However, after a great 2025, some investors may be a bit more concerned about what 2026 will hold. After all, it isn't easy to follow up a strong year with another.

If you look into the reasons why Alphabet's stock had a great 2025, it's clear that it frees the stock up to have another strong 2026, although it will be difficult to be as impressive as 2025 was. I think this makes Alphabet a great buy heading into 2026, and I'd expect Alphabet to emerge as the second-largest company in the world, behind Nvidia.

Image source: Getty Images.

Alphabet faced several doubts heading into 2025

To understand why Alphabet's 2025 was so successful, we need to rewind the clock to the start of 2025. Then, there were several question marks surrounding Alphabet's business. Alphabet's core business is the Google Search engine, and there were questions about its future in the generative AI (artificial intelligence) world. Many thought that Google's best days were behind it, and slipping market share didn't help that opinion.

Furthermore, there was a pending court case questioning the status of Google as a monopoly. Investors didn't know what Alphabet's business would look like in the future, as it could be broken up. As a further negative mark against Alphabet, it was losing the AI race. Competing models like OpenAI's ChatGPT and other models like Perplexity and Claude far outperformed Gemini.

Investors were very skeptical of Alphabet's future, and there was heavy bearish sentiment on the stock. At its low point in April, Alphabet's stock traded for less than 14 times forward earnings. That's value stock territory, and showcased the market's negative outlook on Alphabet's future.

But then, everything changed.

Slowly, all of the question marks surrounding Alphabet's stock were answered, and the results were incredibly positive.

Alphabet received positive news regarding its monopoly court case in September. It wouldn't be broken up, although it did have to make a few minor concessions. The fear that Google Search would be dethroned ended after AI overviews became incorporated into each result. This hybrid approach of traditional search and generative AI turned out to be a great compromise and has maintained Google's place at the top of the search engine market. Google's generative AI model, Gemini, also emerged as a leader in its industry. It was such a threat to OpenAI's dominance that it called a "code red" due to Gemini's improvements.

With all of those problems being resolved, Alphabet's stock was free to be valued at the same level as its tech peers. Now, it trades for around 30 times forward earnings.

Data by YCharts.

While this isn't necessarily cheap, it places Alphabet on a level playing field and allows its business results to shine in 2026.

Alphabet's 2026 is shaping up to be a good one

On top of those questions being answered, another positive one was asked: What if Alphabet sold its in-house computing unit on the open market? Alphabet has developed a custom AI computing unit known as the tensor processing unit (TPU) with Broadcom. This unit was only sold to Alphabet, and could be rented by other clients through its cloud computing network, Google Cloud. However, Alphabet may consider selling these computing units outright to Meta Platforms. That would open up a new business unit for Alphabet in 2026, leading to further growth.

If this business unit takes off and Alphabet can continue growing its core business at a strong rate (its revenue rose 16% in Q3, and diluted earnings per share (EPS) increased by 35%), Alphabet will be in store for a great 2026. While returns won't be as explosive due to its higher starting valuation, I think its growth will allow it to be a market-beating stock in 2026.

Keithen Drury has positions in Alphabet, Amazon, Broadcom, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.