Alphabet (GOOGL -0.91%) (GOOG -0.62%) has been a great addition to equity portfolios. In the past five years, the share price has soared 144% (as of July 27). This is a strong performance for one of the most valuable companies.
I don't believe this technology enterprise's winning returns are over for investors. I predict that this artificial intelligence (AI) stock will double by 2031. Here's the clear math behind this view.
Image source: Alphabet.
Shares will get a big boost from one key tailwind
The most powerful catalyst for the share price to rise 100% in the coming five years is profit growth. Alphabet has historically had zero issues in this area. Its diluted earnings per share (EPS) increased at a compound annual rate of 30% between 2020 and 2025.
Analysts expect diluted EPS to grow at an annualized rate of 17% between 2025 and 2028. If Alphabet reports a 15% compound yearly growth rate over the next five years, then its stock price can double (assuming the valuation remains constant).
Investors might also benefit from valuation expansion, however. As of this writing, Alphabet shares trade at a forward price-to-earnings (P/E) ratio of 22.7. That's barely more expensive than the S&P 500 index, despite this clearly being one of the world's most outstanding companies.
Five years from now, there's a possibility that Alphabet's forward P/E multiple will be higher. If this happens, it provides investors with another tailwind.
NASDAQ: GOOGL
Key Data Points
Money is being poured into AI infrastructure
The biggest story defining Alphabet these days is its all-in strategy when it comes to AI, particularly around building data centers. The leadership team just raised its spending guidance, as the company now plans for $195 billion to $205 billion in 2026 capital expenditures. This number will be even higher in 2027.
The spending spree has resulted in negative free cash flow. Shareholders aren't used to seeing this from Alphabet.
The business will get the benefit of the doubt here. It's monetizing that spending within Google Cloud, which posted 82% year-over-year revenue growth in the second quarter (ended June 30).
The leadership team also highlighted that there is utility for AI across the organization. "Our AI investments are redefining what's possible across every part of our business," CEO Sundar Pichai said on the Q2 2026 earnings call.
While the burgeoning capex figures might make some investors jittery, Alphabet's financial gains are impressive, and it has a wide economic moat, most notably due to the presence of robust network effects. This makes it a high-quality business to own that has a good shot at doubling in five years.
