Wells Fargo has lifted its price target on Alphabet (NASDAQ: GOOGL) to $417 from $411. The bank argues that Google’s custom AI chips, now being sold to outside customers, could become one of the company’s most important new revenue streams. The call, laid out in an investor note dated October 6, comes as investors look for evidence that Alphabet’s heavy AI spending is starting to pay off.
The bank kept its Overweight rating on the shares. Measured against Alphabet’s stock price of $346.47 at the time of the note, the new target implies about 20% upside.
At the center of the thesis are tensor processing units, or TPUs, the chips Google designs in-house to train and run AI models. Wells Fargo analyst Ken Gawrelski expects external sales of those chips to push Google Cloud revenue well beyond what Wall Street currently models. The firm also flagged risks tied to spending, competition, and the economics of the chip business itself.
Why Wells Fargo Thinks TPUs Change the Math
Google has used TPUs inside its own data centers for years. The newer development is selling that capacity to outside customers, which Alphabet has now begun doing. Gawrelski’s note treats this as a significant growth engine for Google Cloud rather than a side project.
Projected TPU Revenue
Wells Fargo estimates Alphabet will generate roughly $9.2 billion in external TPU sales in the third quarter of 2026 and about $11.5 billion in the fourth. That adds up to around $20.7 billion over the second half of the year. The firm said those sales should lift Google Cloud Platform revenue well above current market expectations.
Revised Estimates
The bank adjusted several forecasts after building TPU sales into its model:
| Metric | Wells Fargo View |
|---|---|
| Price target | $417 (up from $411) |
| Rating | Overweight (maintained) |
| 2026 EPS estimate | $20.66 |
| 2027 EPS estimate | $15.17 |
| 2027 revenue forecast | Raised 4% |
| 2027 revenue vs. consensus | 14% above |
| 2028 revenue vs. consensus | 20% above |
| 2028 EPS vs. consensus | 5% above |
| Valuation basis | 27.5x projected 2027 earnings |
As reported, the 2027 EPS estimate sits below the 2026 figure. Published coverage of the note did not explain the gap. Wells Fargo attributes most of the revenue outperformance it expects for 2027 to TPU-related sales.
Cloud Momentum Behind the Call
The upgrade follows a strong run for Google Cloud. Alphabet recently reported cloud revenue growth of 82% year over year, the same period in which it started booking revenue from external TPU sales. Alphabet management has pointed to rising demand for TPU systems from outside customers, alongside the chips’ internal use across Google’s cloud infrastructure.
Wells Fargo expects cloud growth to keep accelerating, driven by AI workloads.
Search Still Growing
The bank also pointed to search, Alphabet’s core profit engine. According to the firm, global search sessions are up about 36% year over year. That figure is relevant to the long-running debate over whether AI assistants will pull users away from traditional search.
The Gemini Factor
Wells Fargo said Google’s Gemini 4 Argon model strengthens the company’s competitive position in AI. In the firm’s view, Alphabet is improving its standing across chips, cloud, and consumer-facing AI models at the same time.
The Risks Wells Fargo Flagged
The note was not one-sided. Wells Fargo identified three main areas of concern:
- Search competition: Rivals continue to push into a market Google has long dominated.
- TPU economics: It is still unclear how profitable selling chips to third parties will be compared with using them internally.
- Capital spending: Building data centers and AI capacity requires large, rising investment.
Analysts are watching whether Google can keep up its rapid cloud growth while absorbing the cost of that buildout.
What Selling TPUs Involves
Commercializing TPUs puts Google in more direct competition in the AI accelerator market, where Nvidia’s graphics processors are the dominant choice for training and running large models. Winning outside customers depends on price, performance, and software support. Those factors will shape the margins Wells Fargo’s estimates rely on.
How the Rest of Wall Street Sees Alphabet’s Stock Price
Wells Fargo is not alone in its optimism. According to analyst consensus data compiled by TradingView, Alphabet carries a Strong Buy rating. The average one-year price target there is $426.26, about 23% above the $346.47 reference price.
That puts Wells Fargo’s new $417 target slightly below the consensus average, even after the increase. In other words, the bank’s call is upbeat but not an outlier. Its distinguishing feature is how much weight it places on external TPU sales as the next leg of growth for Google Cloud.
Disclaimer: This content was partially produced with the help of AI tools and This content is for informational purposes only and not investment advice.