Bank of America resets Google stock forecast before key event

Alphabet (GOOGL) stock is up about 25.34% year to date, at the time of writing, Saturday afternoon, May 16, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 index (SPY) is up about 8.4% in the same period.

Google has managed to outpace the S&P 500, but it has also outpaced other Magnificent 7 members in the same period:

• Nvidia (NVDA) is up 20.82%

• Amazon (AMZN) is up 14.44%

• Apple (AAPL) is up 10.44%

• Tesla (TSLA) is down 6.11%

• Meta (META) is down 6.95%

• Microsoft (MSFT) is down 12.76%

The company with the most popular search engine, a hyperscaler, has positioned itself as the leader in the artificial intelligence race.

There have been several pieces of good news boosting the stock.

Key news for Google stock

Google has signed a deal to provide the Pentagon with its AI models for classified work, The New York Times reported. Their sources said that the Pentagon can now use Google’s A.I. on classified systems for “any lawful governmental purpose.”

On April 22 at Google Cloud Next, the company unveiled its eighth generation of custom Tensor Processor Units (TPU). New TPUs come in two distinct architectures for training (TPU 8t) and inference (TPU 8i). Both are cooled by Google’s fourth-generation liquid-cooling technology.

The new generation of TPUs was a very important announcement for the stock, as the company is the only one with its own custom silicon used for both running and training frontier AI models. Yes, Microsoft and Meta are working on their chips, but so far, they haven’t launched an AI model and claimed it was trained only on their chips.

More Tech Stocks:

Alphabet said it will invest up to $40 billion in Anthropic, reported Reuters. The company has committed $10 billion in cash at a valuation of $350 billion and will invest an additional $30 billion if Anthropic meets performance targets.

Regarding this investment, it is important to note that The New York Times’ latest report says that Anthropic is in talks with investors to raise between $30 billion and $50 billion in a new funding round, which would value it at up to $950 billion.

Google reported very strong Q1 earnings on April 29.

The company’s  developer conference — Google I/O- is set for May 19-20. The question is, will the company launch something impressive as it did at Google Cloud Next?

In a research note shared with me, Bank of America analyst Justin Post and his team shared their expectations for Alphabet stock and Google I/O.

Bank of America says Google I/O “could strengthen confidence in AI positioning”

Analysts noted that expectations are high and that there is a near-term risk that a lack of a “wow” announcement could pressure the stock.

Post wrote: “We think Google could enhance its AI subscription offerings within premium Pro and Ultra tiers focused on higher limits, and broader agent capabilities, while extending AI bundling across the hardware ecosystem and Chrome.”

The team believes Google might showcase its newly launched AI-first laptop category, “Googlebook”, integrated with Gemini workflows.

They said additional announcements will likely include updates on Project Aura next-gen smart glasses, which are being developed with XREAL and are slated for a possible release in the second half of 2026; Wear OS upgrades; Gemini-powered automotive experiences; and potential previews of Pixel 11 hardware.

Analysts noted potential positives for Google stock:

• Gemini LLM innovation could increase Google Cloud adoption.

• Material improvements in Google product capabilities from AI integration.

• AI Mode and Gemini utility improvements could strengthen Google’s position.

• OS invention that provides Android ecosystems with competitive advantages.

• Smart glass capabilities that build excitement.

Post reiterated a buy rating for Alphabet, with a price target of $430, based on a 28 multiple of his estimate for core Google GAAP EPS for 2027 plus cash per share. He added that the “AI surprises” are likely needed to drive further multiple expansion.

He notes that Alphabet has traded at an average multiple of 22x GAAP price-to-earnings ratio over the last ten years. However, he believes the multiple is reasonable given expectations for double-digit revenue growth, Cloud margin expansion, and the opportunity to capitalize on strong AI assets.

Analysts noted downside risks for Alphabet stock:

• Loss of search traffic to AI tools from competitors

• LLM integration in search takes longer than expected

• Revenue pressure from compliance with the EU Digital Markets Act

• Potential for increasing capex and lower FCF, given AI investments

Related: 5-star analyst resets Nvidia stock price target ahead of earnings

This story was originally published by TheStreet on May 17, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.