Powell’s speech, Nvidia’s chips, Meta deal - what’s moving markets
On Tuesday, Citi reaffirmed its Buy rating and a $229.00 price target for Alphabet shares (NASDAQ:GOOGL). The endorsement follows Google’s announcement earlier today of its intention to purchase Wiz, a cybersecurity company, for $32 billion in cash—a deal slated for completion in 2026, subject to regulatory approval. According to InvestingPro data, Alphabet maintains excellent financial health with a "GREAT" overall score, supported by strong profitability metrics and robust cash flows.
Wiz, known for its comprehensive cybersecurity solutions, including Code, Cloud, and Defend, is utilized by over half of the Fortune 100 companies for cloud application and infrastructure security. The acquisition is anticipated to enhance Google Cloud Platform’s (GCP) existing cybersecurity products, building on the previous acquisition of Mandiant in September 2022. This move is seen as a strategic effort to heighten GCP’s competitive edge against rivals AWS and Azure, particularly by increasing multi-cloud attach rates. With $350 billion in revenue and a solid balance sheet showing more cash than debt, Alphabet appears well-positioned to integrate this significant acquisition.
Citi’s analysis suggests that the addition of Wiz to Google’s portfolio should complement its existing offerings and bolster its position in the cloud services market. Despite the ongoing debates surrounding Google due to increased competition in the search engine space, Citi believes that the current stock valuation presents a favorable risk/reward scenario. Google’s shares are currently trading at approximately 16 times Citi’s projected GAAP earnings per share for 2026. InvestingPro analysis indicates that Alphabet is currently undervalued, with a P/E ratio of 20x and strong revenue growth of ~14% over the last twelve months. Discover more insights about Alphabet’s valuation and 10+ additional ProTips with an InvestingPro subscription.
The transaction between Google and Wiz is significant, not only because of the substantial investment but also due to the potential impact on Google’s cloud security capabilities. As the deal awaits regulatory review, the market’s focus will likely remain on the potential benefits and enhancements to GCP’s service offerings that could result from this strategic acquisition. With an impressive market capitalization of $1.96 trillion and analyst price targets reaching as high as $240, Alphabet continues to demonstrate its position as a prominent player in the Interactive Media & Services industry.
In other recent news, Alphabet has announced its largest acquisition to date, purchasing cloud security firm Wiz for $32 billion in cash. This strategic move is seen as a significant enhancement to Alphabet’s capabilities in cloud-native applications and AI solutions. The acquisition is expected to bolster Alphabet’s competitive stance, with Evercore ISI maintaining an Outperform rating and a price target of $205.00 for the company. In other developments, Google’s Gemini has introduced new features, Canvas and Audio Overview, designed to enhance document editing and audio discussions, respectively. These features are being rolled out globally, further expanding Gemini’s collaborative and creative capabilities.
At Google’s annual health event, the company showcased advancements in AI technology aimed at improving global health outcomes. Notable developments include the expansion of AI Overviews and the introduction of new features like "What People Suggest" and Medical (TASE:BLWV) Records APIs. Additionally, Google has successfully launched the first FireSat satellite, part of a constellation designed to enhance wildfire detection using AI. This initiative is a collaborative effort involving several partners and aims to provide high-resolution imagery updated every 20 minutes.
In a shift that could impact the AI chip market, Google is reportedly considering a partnership with MediaTek for its next Tensor Processing Units (TPUs), potentially reducing Broadcom (NASDAQ:AVGO)’s exclusive role. This move is driven by cost considerations and MediaTek’s relationship with Taiwan Semiconductor Manufacturing Co. (TSMC). Despite this potential change, Broadcom continues discussions with Google to co-design some AI chips, highlighting the competitive and evolving nature of the AI chip industry.
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