If AI Is Doing 75% of Google’s New Coding, the Stock Might Be Underpriced

Alphabet (NASDAQ:GOOG | GOOG Price Prediction) is breaking out to new highs after clocking in a fantastic quarterly earnings result that allowed it to “win” Wednesday’s Super Bowl for earnings. Google Cloud stole the show, with revenues skyrocketing 63% to over $20 billion, while Google Search eased what remained of the AI disruption anxieties, which I thought should have been shot down last quarter.

Either way, Alphabet is firing on all cylinders, not just with Google Cloud, but with Waymo, which passed an important milestone of delivering more than half a million autonomous rides per week. Despite the hefty CapEx bill of $190 billion, investors seem to be more forgiving with this Mag Seven titan. It’s a fast mover, and with the completion of Wiz, Google may have a big response to Anthropic’s Claude Mythos up its sleeves as it looks to make its own big mark on the cybersecurity scene. 

Google’s quarter was spectacular. But there’s more to love than just the quarter

While the 63% Google Cloud growth figure was the one that captured the hearts of investors, as shares shot up around 7% in the after-hours session, it’s the 75% figure, which I think could be the big long-term needle mover for the rising AI star. Just over a week ago, Google CEO Sundar Pichai said that “75% of new code at Google is now AI-generated.” That’s absolutely massive, and I don’t think the market has reflected just how far ahead Google could be versus its rivals when it comes to truly capable AI coding.

When you consider how quickly Google went from 50% (last year) to 75%, it probably won’t take too long before the firm surpasses the 90% AI-coded milestone, as agentic AI starts gaining some serious traction. Perhaps there is no better way to market next-generation agents than to show the world how it’s changing things over at Google.

As more enterprises take notice while Google doubles down on its Gemini Enterprise Agent Platform, questions linger as to whether it’s Google that will wind up as the go-to operating system for the agentic enterprise.

Any way you look at it, I think Google might have what it takes to be the second member of the $5 trillion club as the latest earnings beat and AI-generated coding milestone mints the titan as one of the agentic leaders. Indeed, it’s tough to watch the latest leg of the rally if you didn’t get a shot to pick up a few shares when shares were nosediving just a month ago. Still, I don’t think it’s too late, given the momentum behind the cloud and the next generation of Gemini.

Why Alphabet might still be cheap despite the heftier multiple

Of course, a multiple north of 32.0 times trailing price-to-earnings (P/E) is steep for Alphabet standards. But the giant is posting the numbers, with net income blasting off 81% year over year, the cloud surging 63%, while the firm surpassed the 75% AI-coding milestone. These are seriously impressive figures that will be tough for Google’s hyperscaler peers to keep pace with.

Sundar Pichai has pulled it off again, and it might not be long before we start referring to him as one of the new godfathers of AI, especially once the latest (eighth generation) of TPUs (Tensor Processing Units) make the most of their “unfair advantage.” Google is moving fast, and it might be tough to get in its way as the firm follows up on a strong beat with even more strength.

As the race to the top comes between Google and Nvidia, I have to give the edge to the former, especially as Google leads the charge on AI-generated code. The big question is what kind of margin gains the firm will be able to have in store as that number moves closer to 90%.