Google Is Getting a Screaming Bargain on Its New Anthropic Investment. Here's Why.

Key Points

Bloomberg just reported on a major new investment into AI firm Anthropic from Google parent Alphabet.

Alphabet already owned a stake in the AI company, but this will add another $40 billion more to the total.

Fortunately for Alphabet shareholders, it looks to be getting a bargain price for the new stake.

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Last week, Bloomberg reported that Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is on the brink of a massive new investment in AI model company Anthropic.

Under the terms of the deal, Google will invest up to $40 billion in the AI company, starting with a $10 billion investment at a $350 billion valuation, with subsequent investments to come as milestones are met. As part of the deal, Alphabet will also dedicate 5 gigawatts (GW) of computing capacity to Anthropic.

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Forty billion dollars is a lot of money, especially as Alphabet is set to spend up to $185 billion in capital expenditures this year, which is likely to consume all its operating cash flow. Alphabet also just closed a $32 billion all-cash deal for Israeli-American cybersecurity firm Wiz.

When combined with the Wiz acquisition, the Anthropic investment would eat up most of Alphabet's remaining net cash on the balance sheet. That may lead some to question the wisdom of investing so much more in Anthropic at this time.

However, it appears Alphabet may be getting a bargain on its Anthropic shares at these levels, for the following reasons.

Anthropic seems worth way more than $350 billion

It may seem far-fetched that a company founded in 2021 could already be worth more than $350 billion. Still, we haven't seen a technology revolution quite like generative AI before.

Initially focusing on business and enterprise use cases, Anthropic has vaulted into a leadership position in the generative AI race. Annualized revenue has gone from $1 billion at the end of 2024 to $9 billion at the end of 2025, to a stunning $30 billion as of early April 2026.

A $350 billion valuation would therefore put Anthropic's valuation at under 12 times sales. That wouldn't be an out-of-the-question valuation for a decently growing enterprise software company. For instance, cybersecurity company Palo Alto Networks (NASDAQ: PANW) currently trades at 12.8 times sales.

However, Palo Alto is only growing at roughly 15%, while Anthropic has more than tripled in just four months. And keep in mind, Anthropic has not even released Anthropic Mythos, its most powerful model, to the public yet. That's because Mythos was apparently so powerful that it had to be shown only to leading technology and financial infrastructure companies first, so these entities could plug the security holes Mythos identified.

Very likely, the public availability of Mythos could bring in the next wave of adoption and revenue for Anthropic. As such, being able to invest at less than 12 times trailing sales seems like a massive bargain.

As further evidence of undervaluation, Anthropic recently made a tender offer to long-tenured employees in April, inviting them to sell shares to outside investors at the same $350 billion valuation. According to reports, employees chose to hold more shares and sell far fewer shares than expected. That indicates Anthropic employees have high confidence in a higher valuation coming down the line.

And Alphabet will be getting lots of cloud revenue, too

After Alphabet and other cloud giants announced huge spending plans for 2026 on their fourth-quarter earnings calls, these stocks sold off. The fear is that all these giants are spending huge sums of money without assurance of adequate returns.

That's why Anthropic's commitment to using 5 gigawatts of computing via Alphabet's TPU infrastructure is also a positive. While we don't know the exact terms of the deal or how much Anthropic will pay Google for its cloud services, it's likely to be an adequate return on Alphabet's big investment, de-risking all that spending.

And this accounts for a massive amount of spending; a gigawatt of computing can cost $35 billion to $50 billion to build, which means this deal could theoretically see Alphabet spending $250 billion over time just to serve Anthropic. And keep in mind, Alphabet has its own competing Gemini model it must supply as well.

However, the Anthropic deal all but guarantees that amount of computing power will be sold at adequate returns, de-risking Alphabet's massive spending plan.

Alphabet is spreading its AI bet well

While Alphabet is hoping to win the AI wars outright through its own Gemini family of models, the company clearly sees a strong competitor in Anthropic and is effectively "spreading its bets." In fact, Alphabet had already owned about 14% of Anthropic before this deal, according to documents reviewed by The New York Times in early 2025.

Anthropic has raised more money in the meantime, so Alphabet's ownership percentage has probably been diluted; however, the new investment could bring that total back up. According to the Times, Alphabet is only allowed to own up to 15% of Anthropic; therefore, this investment might only bring its ownership back to that level, albeit at a much higher valuation.

Fortunately for Alphabet shareholders, the Google parent appears to be getting a fantastic deal on today's add-on investment. Anthropic is reportedly eyeing a big IPO later this year, and that IPO should be at a significantly higher valuation than what Alphabet is paying for its shares today.

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Billy Duberstein and/or his clients have positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.