Alphabet's Intersect Acquisition: A Strategic Catalyst for AI-Driven Growth and Undervalued Entry Point in 2026

In a bold move to fortify its position in the AI arms race, Alphabet Inc. (GOOGL) has agreed to acquire Intersect, a clean energy infrastructure developer, for $4.75 billion in cash plus the assumption of debt according to the announcement. This acquisition, set to close in the first half of 2026, underscores Alphabet's commitment to addressing the surging demand for energy-intensive data centers and AI computing. With AI now a cornerstone of Alphabet's growth strategy, the Intersect deal represents not just a tactical infrastructure play but a strategic catalyst for long-term value creation.

Strategic Alignment with AI and Infrastructure Needs

Alphabet's acquisition of Intersect is a direct response to the escalating energy demands of its AI ambitions. The company is investing heavily in AI-native infrastructure, including custom silicon (Tensor Processing Units or TPUs) and the Gemini AI model, to maintain leadership in the AI landscape. However, as U.S. power grids struggle to meet the electricity needs of generative AI development, securing reliable energy sources has become a critical bottleneck.

Intersect's portfolio of in-development projects-expected to generate 10.8 gigawatts of power by 2028-addresses this challenge head-on. By co-locating energy generation with data center needs, Intersect's expertise will accelerate Alphabet's infrastructure expansion while enabling exploration of advanced energy technologies. Notably, the acquired projects are over 20 times the output of the Hoover Dam, providing a scalable solution to power Alphabet's AI-driven cloud services. This synergy positions Alphabet to meet the projected 2026 growth in AI computing demand, which analysts anticipate will drive significant revenue expansion.

Valuation Metrics and Analyst Forecasts

Despite Alphabet's aggressive investments, its valuation remains compelling. As of 2026, Alphabet trades at a forward P/E ratio of 27.70 and a PEG ratio (5-year expected) of 1.64 according to financial data. While the PEG ratio exceeds 1, this metric is often skewed by the company's high-growth trajectory. Analyst forecasts suggest robust earnings and revenue growth: expected EPS of $2.58 (a 20% year-over-year increase) and revenue of $94.26 billion (up 15.49%) according to financial data. For the full year, the Zacks Consensus Estimates project earnings of $10.52 per share and revenue of $345.69 billion, reflecting year-over-year growth of 30.85% and 17.13%, respectively according to financial data.

These figures highlight a disconnect between Alphabet's current valuation and its growth potential. The PEG ratio, while elevated, becomes more attractive when contextualized against the company's expanding AI capabilities and infrastructure investments. Analysts have even speculated that Alphabet could become the world's largest company by market cap in 2026, driven by its dominance in AI and cloud computing.

Investment Thesis: A Strategic Catalyst and Undervalued Entry Point

The Intersect acquisition is a masterstroke for Alphabet's long-term positioning. By securing energy infrastructure ahead of demand, Alphabet mitigates a critical constraint for AI expansion while diversifying its asset base. The deal's structure-retaining Intersect's brand and leadership-ensures operational continuity and leverages existing expertise. Meanwhile, the valuation metrics suggest Alphabet is undervalued relative to its growth prospects, particularly in a market where AI-driven companies are commanding premium multiples.

For investors, this represents an entry point to capitalize on Alphabet's dual strengths: its AI innovation pipeline and its ability to scale infrastructure at speed. As the company integrates Intersect's projects and advances its Tensor Processing Units and Gemini AI model, the path to sustained earnings growth appears well-defined. In a landscape where energy constraints and AI competition are intensifying, Alphabet's strategic foresight and valuation attractiveness make it a compelling long-term investment.