Back in January 1996, I wasn’t even two years old when Sergey Brin and Larry Page started working on a project for their Stanford PhD, a search engine for all of those URLs above the browser you’re reading this in.

By 1998, I was learning the “Alphabet”. Rajeev Motwani and Terry Winograd co-authored with Page and Brin the first paper about the search engine project, describing PageRank and the initial prototype of the Google search engine, published that same year. This year, I’m relearning a different Alphabet, a company that has greatly contributed to my education, successes, and life in general. Google hasn’t taken much from me besides maybe making me watch a few ads on Youtube. I can’t say the same for all of the social media apps I have on my phone.

From a personal perspective, Gmail and many of it’s critical services are completely free. They help millions of people around the world.

When investors talk about the “Magnificent 7,” the conversation immediately fractures. Nvidia is the AI-chip revolutionary. Microsoft is the enterprise AI king. Meta is the social media rebound, and Tesla is the EV visionary.

And then there’s Alphabet (Google). In a crowd of high-flyers, Alphabet is often treated as the “mature” one, the reliable-but-boring utility. The market has spent the last three years consumed by fear, uncertainty, and doubt (FUD) about its future: AI will kill Search, regulation will break it up, and it’s just a one-trick advertising pony.

The narrative is lazy, outdated, and has created the single most significant valuation disconnect in high-growth tech. While its peers trade at nosebleed multiples, Alphabet is being priced as if it’s struggling to keep up. Search revenue ALONE is up more than 14% YoY. The business is firing on all cylinders.

The market is pricing Google for its fears. It’s getting a world-class AI leader, the world’s largest cloud-streaming service, and a dominant cloud provider for free. Alphabet is critically undervalued and if you’re worried about getting laid off (which you should be), then you should be on the offensive by investing in the company that’s positioned to be the reason why you could be getting laid off in the first place.

The Glaring Valuation Gap

Let’s start with the data. The “Magnificent 7” are loved because they produce staggering growth. But they are not all valued equally.

If you look at trailing price-to-earnings (P/E) ratios — a standard measure of how much you’re paying for a company’s profit — the picture is stark:

• Microsoft and Apple trade at P/E ratios in the mid-30s.
• Amazon often trades at a P/E well above 30x.
• Alphabet currently trades at a P/E ratio of around 27x.

While a 27x P/E isn’t “cheap” in a historical sense, it’s a massive discount to its direct peers. It trades closer to the broad S&P 500’s forward P/E of ~23x than to the AI-fueled giants it competes with.

The market is effectively saying that Alphabet — a company with dominant, high-growth, high-margin businesses in AI, Cloud, and Video — deserves a valuation multiple far lower than its rivals.

The market is fixated on one number: spending.

The Financial Fortress the Market Ignores

The entire bear case for Google rests on its astronomical spending. The fear is that Google is “buying” its AI relevance, torching its margins in a desperate attempt to catch up.

The spending is very real. Alphabet has guided for 2025 capital expenditures (CapEx) to be in the range of $91 billion to $93 billion. This is an almost unbelievable sum, dedicated to building out the data centers, custom TPU chips, and infrastructure to power the Gemini-era of AI.

But that’s it. They see the spending. They are ignoring the profit.

Alphabet is not a company spending money to find a business model. It is a financial fortress funding its next era of dominance from its own pocket change. Look at the numbers (based on trailing twelve months):

• Insane Net Income: Alphabet generated a staggering $124 billion in net income. That isn’t revenue; that’s pure, bottom-line profit.
• Massive Free Cash Flow (FCF): After funding its massive, accelerating CapEx, the company still produced over $73 billion in free cash flow.
• Gargantuan Shareholder Returns: The company is executing a $70 billion share buyback program, rewarding shareholders directly.
• A Growing Cash Pile: Here is the most critical part: even after the record-breaking $90B+ CapEx guidance and the $70B buyback, Alphabet’s balance sheet is still growing. Its cash and marketable securities hoard has increased to nearly $100 billion.

This is not a company in trouble. This is a company demonstrating unparalleled financial power. It is simultaneously outspending nearly every company on Earth in a key technological race and returning more money to shareholders than most companies make in a decade, all while its bank account continues to grow.

The market’s fear of its spending is completely misplaced. The spending is the moat.

Deconstructing the fear

Once you understand the financial strength, the other bear cases seem trivial.

“AI Will Kill Google Search”

This was the big one. When ChatGPT launched, the consensus was that conversational AI would make Google’s “ten blue links” obsolete.

The Reality: The opposite is happening.

1. Search is Resilient: Google’s Search revenue continues to grow. Users haven’t fled. It turns out that for commerce, local queries, and real-time information, an ad-supported search engine is still a highly effective tool.
2. Google’s AI is a Profit Engine: The market missed a key point: Alphabet is an AI-native company. With its Gemini models and custom TPU chips, it’s not just defending its turf; it’s going on offense. Recent earnings proved that AI integration is expanding its operating margins. Backed by major partnerships with Anthropic and Apple, Alphabet is cooking everyone in it’s tracks who dares to compete with them, including OpenAI.

“Regulation Will Break It Up”

The DOJ’s antitrust case has been a dark cloud for years.

This risk is now a potential catalyst. First, Alphabet has a long history of navigating global regulatory challenges. Second, many analysts now argue that a forced breakup — for example, spinning off Google Cloud or YouTube — would unlock massive value, forcing the market to price these businesses as the high-growth standalones they are. But even then, Alphabet not thriving is a security risk to the U.S. Trump has effectively let Google run free, and for good reason. Google’s Quantum AI efforts are incredibly important to national security and the company is a main show of force against China.

The Three Engines You Get for Free

The “critically undervalued” thesis comes from this simple fact: if you pay a fair multiple for the core Google Search & Ads business, you are getting three other world-changing businesses for almost nothing.

Google Cloud (GCP)

For years, GCP was a costly #3 in the cloud wars. Not anymore.

• It’s Profitable: Google Cloud is now solidly profitable and growing at a staggering 30–40% clip year-over-year.
• It’s an AI Staple: The world is adopting a multi-cloud strategy, and GCP’s strength in AI and data analytics makes it an essential partner alongside AWS and Azure. AWS’s recent massive failure is only another catalyst for GCP to scoop up multi-cloud offers.

YouTube

YouTube is, without question, one of the most valuable and under-monetized assets on the planet.

• The Dominant Streamer: It is the most-watched streaming platform in the United States, period. It has more viewers than Netflix, Disney+, and Max combined.
• The Subscription Giant: Between YouTube Premium, YouTube TV, and Google One, Alphabet now has a massive, recurring-revenue subscription business that the market almost never discusses. That doesn’t even include Google Workspace, which The Garber Company has been using and I have praised for it’s insane value.

Waymo & “Other Bets”

This is the ultimate call option. Alphabet, through its Waymo subsidiary, is the undisputed leader in autonomous driving. It’s already operating fully driverless commercial taxi services in multiple US cities with barely any issues.

This is a business with the potential to disrupt the entire multi-trillion dollar transportation industry. The market assigns virtually zero value to this in Alphabet’s current stock price. The only competitor in this space that’s even close to Waymo’s league is in China with Baidu operating a similar fleet.

The Bull is Ready to Run

The market is full of contradictions, but none is as stark as Alphabet.

You are looking at a company that is:

• Spending $90+ billion a year to build an unparalleled AI moat.
• Generating $124 billion in annual profit and $73 billion in FCF while doing it.
• Growing its $100 billion cash pile even after massive buybacks.
• Trading at a significant discount to its Mag 7 peers.
• Giving you YouTube, Google Cloud, and Waymo for free.

Investors are pricing in the cost of the AI war but none of the upside. They are paying for a mature, 20th-century advertising business. They are getting a diversified, 21st-century AI-first conglomerate that is, quite simply, the most powerful and profitable cash-generation machine in corporate history.

At The Garber Company, we’re bullish and long on Alphabet’s services. They help power our creative engine to get everything done from drafting legal documents and signing massive contracts to developing beautiful AI-assisted imagery and video. If you’re worried about AI taking your job (and you should be), then you need to invest in your future. Our position is that you really only should have one. Start to learn this Alphabet.