The excitement surrounding artificial intelligence (AI) in the market is undeniable. While interest rate cuts and inflationary pressures may draw investor attention, nothing beats the excitement around AI. Over the past year, Nvidia has emerged as the poster child of the AI boom, with its shares soaring 404% since the start of 2023. However, there is another tech behemoth that investors should not overlook – Alphabet.
Alphabet, the parent company of Google, is arguably the best AI stock to buy right now. Unlike Nvidia, which is an infrastructure provider, Alphabet has been prioritizing AI advancements for quite some time. In fact, Google Search, Alphabet’s top segment, started using machine learning and AI capabilities back in 2001 to enhance user experience. This early focus on AI has contributed to Alphabet’s dominant position in the market today.
Google Search, with its immense reach and popularity, remains one of the most important internet-based services globally. In the fourth quarter of 2023, Search generated $48 billion in revenue, accounting for 56% of Alphabet’s total revenue. Back in 2016, Alphabet’s CEO Sundar Pichai declared the company to be “AI-first” and committed to creating a world where computing becomes universally available.
Alphabet has successfully incorporated AI into many of its products. For example, Gmail uses AI not only for spell check but also for reducing spam. Google Cloud continues to integrate AI functionality into its tools, benefiting clients with this revolutionary technology. Another notable feature is Google Photos, which allows users to search for specific images based on their content. These examples represent just a fraction of Alphabet’s AI offerings.
One of Alphabet’s significant advantages in the AI space is its data advantage. The company has 15 products and services used by over 500 million people worldwide. Google.com and YouTube.com, in particular, are the two most visited websites globally, generating massive amounts of data. This continuous influx of data allows Alphabet to consistently train and improve its AI systems. This positive feedback loop, where more data leads to better AI models, results in improved customer experiences, increased usage, and more data collection. This data advantage sets Alphabet apart from other top companies in the AI industry.
In terms of valuation, Alphabet is attractively priced compared to other AI stocks. It trades at a price-to-earnings (P/E) multiple of 25.6, while Nvidia’s P/E ratio is 97.2. Although Nvidia is experiencing significant growth, the high P/E ratio suggests that investors are pricing in unlimited growth potential, which may not be sustainable. Considering the attractive valuation and Alphabet’s strong position in AI, it is a compelling investment choice.
In conclusion, while Nvidia has been grabbing headlines as the leader of the AI boom, investors should not overlook Alphabet. With its long-standing focus on AI advancements, dominant market position, and data advantage, Alphabet is the best AI stock to buy right now. As the AI industry continues to grow and evolve, Alphabet is well-positioned to remain a leader in AI and potentially separate itself from other top companies in the space.
