Equity Research · Current Holding
Alphabet
GOOG · NASDAQ · Internet · Cloud · AI Infrastructure
The market is pricing the end of Search into the most durable cash machine in technology.
Quan Pham · M’Squared Capital Research · August 2026
What the market is missing
The consensus story is that generative AI hollows out Google Search. The query data does not agree. Search volumes are still growing, AI Overviews monetize at roughly the same rate as the links they sit above, and Gemini has quietly closed the model-quality gap that was supposed to be Alphabet's undoing. The fear lives in the multiple, not in the numbers.
Why I own it
I own Alphabet because I am paying a discount to its mega-cap peers for a franchise with better free-cash conversion and two engines the market still treats as costs. Cloud has crossed into real operating profitability with a backlog that compounds faster than the business it sits inside. And I get the TPU program and Waymo close to free — custom silicon that takes a meaningful bite out of the industry's dependence on a single GPU vendor, and an autonomy business the sum-of-the-parts ignores entirely.
What has to happen
Cloud margins keep printing ahead of the sell-side. Gemini holds share in consumer and attaches to subscriptions. The antitrust remedy lands somewhere the market can price, removing the legal cloud rather than the business. None of this requires heroics — it requires the numbers to keep doing what they are already doing.
What would prove me wrong
If a court forces structural changes to the ad-tech stack or the default-search agreements, the earnings base I am underwriting moves, and I have to re-underwrite it. If AI-capex intensity keeps compressing free cash faster than Cloud expands it, the free-cash argument weakens. And if query share genuinely leaks to an AI-native entrant — not in a demo, in the monetizable data — then the terminal-decline crowd was early, not wrong.
Valuation & exit
My $450 objective values Alphabet on roughly 24× 2027 earnings with Cloud carried separately — still a discount to peers I regard as lower quality. About $100 a share of net cash and a standing buyback set the floor. I am paid to be a patient owner here; I would only leave early if the antitrust outcome broke the earnings base rather than just the sentiment.
Position
Core Long
Price objective
$450
Sector
Internet
Status
Current holding
Last updated
August 2026
This note is the opinion of M’Squared Capital and is provided for informational purposes only. It is not investment advice, nor an offer or solicitation to buy or sell any security. Price targets and entry and exit levels reflect the firm’s proprietary views and realized transactions; they are not forecasts of future results. The firm may hold, add to, reduce, or close any position at any time without notice. Past performance is not indicative of future results.