Google is playing a different AI game than everyone else, and Wall Street may be missing the point

Google is playing a different AI game than everyone else, and Wall Street may be missing the point Google is playing a different AI game than everyone else, and Wall Street may be missing the point Investors have been fixated on the relative performance of Alphabet’s AI models when they should instead be cheering the company’s cloud potential, an analyst says MoffettNathanson projects Google Cloud revenue could grow at a 48% compound annual growth rate through 2030. /iStock Shares of Alphabet have fallen 15% off their May highs as the company’s artificial-intelligence capabilities come under scrutiny. Yet the fixation on AI leaderboards may be missing the point, according to MoffettNathanson analyst Michael Nathanson. High-profile departures from the company’s Google DeepMind lab, combined with a delayed Gemini 3.5 Pro model, have led many to wonder if Alphabet is losing its cutting-edge AI capabilities.

Nathanson, though, believes that Alphabet is playing a different game than competitors like OpenAI and Anthropic. That’s because Alphabet’s large cloud-computing business may hold the key to its success in the AI era, rather than whether or not the company has the most high-performance AI model, Nathanson wrote in a Wednesday note. Why humanoid robots are so hard to mass-produce Play video: Why humanoid robots are so hard to mass-produce Robots are already transforming factories and warehouses.

But the vision of autonomous machines working almost anywhere remains far from a reality. What will it take to get us there? I agree to the Terms of Use, Privacy Notice and Cookie Notice.

I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time. Alphabet is instead choosing to funnel resources to its Google Cloud business, which Nathanson believes is a more profitable strategy than “chasing frontier leadership at any cost.” **Read**: A decade of internal AI battles is finally catching up to Google Alphabet is uniquely positioned across the entire AI tech stack, spanning from its custom chips to distribution surfaces like YouTube and Android.

Maintaining its full-stack capabilities is a better use of money than making Gemini a frontier model, Nathanson wrote. On its latest earnings call, Alphabet said that over half of the company’s machine-learning computing power is expected to go to the cloud business in 2026, and Nathanson expects that percentage to only grow from here. That’s not to say that Google will forgo its Gemini ambitions.

Alphabet’s best strategy is to keep Gemini “good enough to remain at or near the frontier” while investing more into Google Cloud, he added. While the latest Gemini Pro model remains delayed, Google has been releasing more cost-efficient Flash models. MoffettNathanson projects Google Cloud revenue will surge to $415 billion by 2030, representing a 48% compound annual growth rate.