Good morning, market mispricing enthusiasts!
The market keeps treating Alphabet (Google’s parent company) like it’s just a giant ad business with a search bar attached.
That might be the most expensive misunderstanding on Wall Street.
Today we’re connecting three things most investors still treat separately:
Google Cloud
Google’s hidden SpaceX stake
Why Warren Buffett quietly bought $4.3B of Alphabet stock
They’re actually the same story.
The market may be making a massive mistake with Google.
Its stock $GOOGL ( ▼ 0.33% ) currently trades at around 20x forward earnings.
That means investors are paying about $20 today for every $1 Google is expected to earn next year.
In other words, the market is valuing Google below a normal S&P 500 company.
Source: Reuters
That’s what makes this so interesting.
Because Google is not growing like an average company.
Source: Qualtrim
Revenue is increasing around 15% annually
Google Cloud is growing 35.8% per year
Cloud operating income tripled from $4.6B to $13.9B
Google has $100B+ in cash
It is spending tens of billions building AI infrastructure
That sounds less like a mature ad company…
And more like an AI infrastructure company quietly hiding inside one.
But that may not even be the most overlooked part.
Google also owns 7.4% of SpaceX, originally acquired through a $900M investment in 2015.
That stake may already be worth roughly $40B today.
And when SpaceX goes public later this year at a $1.75T valuation, Google’s share could be worth around $130B.
Which means investors buying Google may also be getting indirect exposure to:
Starlink (Satellites)
Grok (AI)
Colossus (Compute)
SpaceX (Rockets)
Most investors still do not think about Google this way.
But that could change quickly.
When SpaceX IPOs, Google could report a massive profit jump without its core business changing at all.
Just think about that for a second.
That is roughly four years of Google Cloud operating profit from one asset and one event.
That could force investors to completely rethink what Google actually is.
Because if the market stops valuing Alphabet like a traditional ad business and starts valuing it more like:
An AI infrastructure company
An indirect bet on SpaceX’s future growth
A cheaper, high-growth AI play
Then the stock itself could be worth much more.
In fact, that may already be starting to happen.
One of Warren Buffett’s last major buys was a $4.3B position in Alphabet.
Source: Yahoo Finance
Out of every public company in the world, Warren Buffett chose Google.
Maybe he understood something the market still misses: Google is no longer just a search engine.
It may quietly be evolving into one of the most important AI infrastructure companies on Earth.
And if investors eventually start seeing it that way too, today’s valuation may look surprisingly cheap in hindsight.
Is the market underestimating Alphabet?
