Google upgraded as Wells Fargo cites widening AI capacity lead

Investing.com -- Wells Fargo upgraded Alphabet shares to Overweight, arguing in a note on Monday that the company is positioned to lead the next phase of artificial intelligence thanks to advantages in data, distribution, and compute capacity.

Analyst Ken Gawrelski wrote that Google shows “leadership in 3 key traits of AI winner: customer data, distribution and compute capacity.” The analyst raised the Alphabet price target to $387 from $354.

The firm’s latest capacity analysis underpins the call. Wells Fargo said its Project Google framework shows compute capacity “expands to 35GW by 2028 from 15GW at YE25,” adding that the company is extending “its capacity lead relative to the hyperscaler peer group.”

As long as hyperscaler ambitions remain “bounded by compute capacity,” Wells Fargo sees Google gaining a durable edge across cloud, search and emerging agentic AI businesses.

The bank significantly raised its Google Cloud forecasts, saying it now expects 2026 GCP revenue growth of 60% year-on-year, 11% above consensus, with 2027 and 2028 growth running 16% and 12% above consensus.

It also estimates GCP’s compute capacity rising to 16.9GW in 2028 from 7.6GW in 2025. Cloud operating income projections for 2026 and 2027 are now 10% to 15% above Street estimates.

Wells Fargo also highlighted Google’s opportunity to build a Gemini subscription business, projecting it will reach “$12B ARR from $4B exiting 2025,” as well as potential upside from its relationship with Apple’s Siri.

While the AI search transition remains a risk, Wells Fargo said Google has effectively “stalemated ChatGPT at ~13% share since July 2025,” with search activity now expanding.

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