Alphabet: A Multifaceted AI and Tech Giant Poised for Growth

This Leading Artifical Intelligence (AI) Stock Is Absurdly Cheap Right Now | The Motley Fool

Artificial intelligence (AI) investing continues to be at the forefront of most investors' minds. There is a lot to come from this technology, and we've barely scratched the surface. One AI stock that is fairly cheap right now is Alphabet (GOOG 1.47%) (GOOGL 1.57%), and it is one of my best stocks to buy right now. Even with what's going on in DeepSeek's R1 generative AI model, I still think Alphabet is an attractive purchase. Alphabet is Google's parent company, so it doesn't necessarily have to win the generative AI arms race. This is important, as Alphabet's generative AI platform, Gemini, is normally listed near the top of the best generative AI models, although it isn't in first place. While Alphabet would love to have Gemini as the top generative AI platform, it doesn't need it to be. Alphabet's primary business is advertising, with 75% of its revenue coming from advertising sources in Q3. While Alphabet has spent time developing the Gemini model to be something that developers can build upon (which they have), the real strength of its model has been its integration with its various ad services. With Gemini integrated into Google Ads, users can develop ad campaigns much faster that also adapt to individual consumers. This keeps Google at the top of the advertising game and ensures that clients will continue to come to them as a place to get a great return on advertising dollars spent. Alphabet also has Google Cloud, its cloud computing division. Many non-AI workloads have been built on Google Cloud alongside AI workloads. Cloud computing will continue to be a huge movement, as companies need access to the computing power to build their AI models and workloads. While clients may use Gemini or DeepSeek's R1 as a base language to build their platforms, they still need the computing power that a cloud computing provider has to run them continuously. As a result, Alphabet's cloud computing segment should still be primed for stronger growth. So, even with the news of DeepSeek's R1 model being released, Alphabet is still positioned strongly to benefit from the AI arms race. Fortunately for investors, it's also on sale right now. Like some of its big tech peers, Alphabet never achieved a premium valuation. Right now, Alphabet's stock trades for 25 times trailing earnings and 21 times forward earnings. Compared to the S&P 500, which trades for 26 times trailing earnings and 22 times forward earnings, Alphabet trades at a slight discount. This is despite Alphabet having strong growth figures. In Q3, Alphabet's revenue rose 15% year over year, and earnings per share (EPS) jumped from $1.55 to $2.12. Alphabet reports Q4 earnings on Feb. 4, and there may be some scrutiny and discussion about AI spending (because DeepSeek reportedly trained its AI model for under $6 million), but if Alphabet takes cues from DeepSeek and makes its model cheaper to train, that will only boost its earnings over the long run. Alphabet is still a top stock to buy, both for its AI platforms and its normal business. While the markets may be a bit bumpy right now, it's an excellent time to take advantage of it and scoop up some shares at an even bigger discount.

A Once-in-a-Decade Opportunity: This Company Is a Leader in AI and Quantum Computing and Could Soar in 2025 | The Motley Fool

Artificial intelligence (AI) and quantum computing investing are two incredibly popular trends. While the applications of these two technologies could intersect, the companies involved with each sector often do not. However, one company is recognized as a leader in both fields, and its stock is incredibly cheap right now. The company? None other than Google parent Alphabet (GOOG 1.16%) (GOOGL 1.13%). Alphabet has significant investments in both fields and is a smart way to play both trends while also cashing in on its existing business. This combination of a rock-solid core business and strong potential for upside makes Alphabet an incredibly smart investment pick. First, let's talk about Alphabet's core business. Some 75% of the revenue that Alphabet brings through the door comes from advertising on its various platforms, like the Google search engine and YouTube. While this is a mature business, it's constantly evolving to include the latest generative AI technology that Alphabet is developing. Mentioning generative AI, Alphabet has Google Gemini, which is seen as one of the top options in the space. While it hasn't gotten near the fanfare as ChatGPT, it's likely used more often, as it provides an AI-powered summary of search results every time you perform a Google search. It also helps advertisers make ads quicker and more effective, and it gives advertisers the power to tailor the ad to each consumer. As a result, Gemini may be the most integrated generative AI platform available. Another segment benefiting from Gemini's prowess is Google Cloud. Google Cloud is Alphabet's cloud computing segment and provides its clients with the computing power and development tools they need to develop, train, and run their AI models. Google Cloud has seen explosive growth recently, with revenue rising 35% in Q3. This is an important segment for Alphabet, as it is by far the most promising growth sector for the company. Lastly, Alphabet kicked off the quantum computing investment interest in December 2024 when it announced its Willow quantum computing chip had accurately completed a calculation that would take the world's fastest supercomputer 10 septillion (10 with 25 more zeros behind it) years to complete. The biggest problem facing quantum computing today is that it isn't inherently error-free. However, Alphabet figured out a way to substantially reduce errors with its Willow chip, and it got investors excited that a quantum computing breakthrough was near. However, investors need to be a bit more patient. Alphabet provided this useful chart to convey how useful the test it completed was. Although this test was incredibly difficult, it has no functional meaning. Now, the work begins to become commercially relevant, which may be some time away. At the annual CES trade show, Nvidia CEO Jensen Huang stated that he believes useful quantum computing is still 15 years away. If he's right, investing in a company like Alphabet for quantum computing is the smart move, as it has other businesses like advertising and AI that will continue making investors money while quantum computing technology develops. This is the main reason why Alphabet is a top pick in the quantum computing space for me, as winning the quantum computing race isn't a requirement for Alphabet's stock to succeed, although it would be a huge boost if it did. Still, Alphabet's base business is strong and priced incredibly cheap right now. The stock doesn't have a premium valuation attached to it, as it trades for less than the broader market right now, as measured by the S&P 500. Alphabet is cheaper at just over 22.1 times forward earnings versus 22.6 for the S&P 500. Although those numbers aren't that far from each other, the market message is clear: Alphabet is an average company. Considering Alphabet's strong core business, Google Cloud growth, and the tailwinds of AI and quantum computing, this seems like an erroneous conclusion. As a result, I think investors have a once-in-a-decade opportunity to scoop up Alphabet shares at a cheap valuation and hold them for a long time as the AI and quantum computing megatrends unfold.

4 Reasons to Buy Alphabet Stock Like There's No Tomorrow | The Motley Fool

With the market just hitting new all-time highs and the average market valuation at the upper end of the historical range, some may think there aren't any bargains left to buy. But that's usually never true, as there are always bargains to be found in some corner of the market. And sometimes, a good deal comes even in the form of a household name staring you right in the face. Today, Alphabet (GOOG 1.16%) (GOOGL 1.13%) looks like that very bargain. Despite a nice rally last year, Alphabet remains the cheapest stock in the Magnificent Seven. Alphabet has a P/E ratio of 26.8, whereas no other Mag Seven stock has a valuation below 30. On a forward basis, Alphabet's forward P/E ratio is just 22.5. The low valuation comes in spite of several other elements that make Alphabet even cheaper than it looks. This includes the $93 billion in cash on Alphabet's balance sheet, good for about 4% of its market cap. And Alphabet continues to lose money on its experimental "Other Bets" segment. While suppressing today's profit, as we'll see, some of those projects are likely to have significant positive value. Part of the reason Alphabet's valuation is so low is that investors are concerned that the bevy of artificial intelligence start-ups like OpenAI, Perplexity, and others will threaten the Google Search business. However, Google Search has enormous distribution, so much so that the name Google is synonymous with search. And Alphabet's AI subsidiaries DeepMind and Google Brain, brought together by Google in 2023, were the first to develop transformer technology, which is the breakthrough innovation that has enabled ChatGPT and other recent AI innovations. The advent of ChatGPT initially caught Alphabet off guard, but Google's AI researchers seem to have gotten their act together over the past year. In December, Alphabet released Gemini 2.0, its in-house large language model, to rave reviews. And by putting AI-powered summaries at the top of appropriate searches, Google should be able to head off would-be competitors and keep customers in the Google ecosystem when searching for information. Last quarter, Google Search still managed to grow 12.2% despite its already massive size, showing no ill effects from the new AI competition. And since Alphabet produces its own in-house tensor processing units and has optimized its own AI infrastructure, Google's costs to produce AI are likely to be much lower than any startup, which probably has to run models on expensive Nvidia GPUs rented from the major clouds. Speaking of cloud, while Google Search and YouTube currently get most of the attention and drive most of Alphabet's profit, investors may not be giving Google Cloud the credit it deserves. Although third in the cloud infrastructure oligopoly, Google Cloud is more than holding its own. Last quarter, Google Cloud revenue accelerated 35%, the highest growth rate of any of the cloud IaaS providers, and operating profit surged 7.3 times over to $1.95 billion. Google Cloud wasn't profitable as recently as two years ago, but the current $8 billion profit run-rate is beginning to contribute more meaningfully to overall profitability. Google Cloud contributed 7% to overall operating profit last quarter, and that figure is set to increase as enterprises increasingly migrate from on-premise to cloud-based IT services. Cloud is set to be a second meaningful profit contributor, diversifying Alphabet away from its dependence purely on digital advertising dollars. Finally, Alphabet also has its often-ignored "Other Bets" segment, a loss-generating consortium of futuristic ventures that could take years or decades to pay off. Waymo began as an experimental self-driving program at Alphabet in 2009 within "Other Bets," but 2024 proved to be a pivotal year for the technology. Having already started service in Phoenix in 2020, Waymo expanded its San Francisco service area and began full service to the public in Los Angeles last year. Amazingly, Waymo grew to the same market share as Lyft in San Francisco as of November, according to YipIt data. Even more cities could see autonomous disruption soon, as Waymo also announced an expansion to Austin and Atlanta in 2025, with a Miami expansion set for 2026. Waymo also announced it would begin its first international testing in Tokyo next year. While investors are ascribing hundreds of billions of dollars in value to Tesla's (TSLA -1.41%) robotaxi ambitions, they don't appear to be valuing Waymo as anything significant, given Alphabet's current value. But considering Waymo is the one with its own ride-hailing service already in operation in three major cities and taking market share from incumbents, Waymo seems like another hidden gem in Alphabet's technology portfolio.