Alphabet’s Dominance in AI and Investment Potential Revealed

I recognized Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) as a leader in artificial intelligence (AI) long before considering its business impact and investment potential. The Google search engine, introduced in the late 1990s, heavily influenced my studies in information science and AI during that era. Previous search engines like Lycos, WebCrawler, and Alta Vista offered basic results but required users to craft complex queries. Finding precise information involved cumbersome processes such as using search strings like (Motley AND Fool AND investing) AND NOT (scam OR speculation).

Image source: Getty Images.

The brilliance of Google’s search engine lay in its ability to anticipate users’ needs. It ranked results logically, making it considerably easier than earlier platforms. This innovative approach, built on deep text analysis, laid the groundwork for what would evolve into a robust AI framework.

Transforming AI into Everyday Tools

Over 25 years, not much has changed. Google has continually enhanced its search engine, launching AI-driven tools like Google Translate and Google Maps, making AI accessible to everyone. Even before adopting the Alphabet name, Google proved to be a master of AI technologies.

It was no surprise that Alphabet unveiled a large language model (LLM) shortly after OpenAI’s ChatGPT 3 was released. My curiosity remains high regarding potential developments hidden in Alphabet’s AI labs.

AI Advancements Keeping Google at the Forefront

Alphabet’s Google dominates the online search and advertising markets, primarily due to its sustained investment in AI. The Gemini LLM represents a significant competitor to ChatGPT and is already integrated into popular services such as Gmail and Google Docs. Additionally, Google Search incorporated an AI mode in March 2025, showcasing Gemini’s expanding capabilities.

Google’s expertise in AI is unquestionable. The company stands out as a leader, backed by extensive engineering resources and financial assets, essential for pursuing groundbreaking ideas.

Potential Returns on Alphabet Investments

Investors in Google (and Alphabet) have been rewarded handsomely. A $1,000 investment at the time of Google’s IPO in August 2004 would be valued at over $63,700 as of May 13, 2025, reflecting a remarkable growth story.

Despite this growth, Alphabet’s stock has never appeared overvalued. In the current market, especially amid the ChatGPT-driven AI boom, Alphabet’s valuation ratios remain appealing compared to its competitors like Microsoft (NASDAQ: MSFT) and Nvidia (NASDAQ: NVDA):

Data collected from Finviz.com on May 13, 2025.

Even if Alphabet’s stock price were to double, its valuation ratios would still compare favorably to Microsoft and Nvidia. While Nvidia’s growth justifies its premium pricing, Alphabet’s sales and earnings are rising at a faster pace than Microsoft’s. This prompts an intriguing question: Is Alphabet’s stock undervalued, or is Microsoft’s valuation too high? The decision is up to potential investors.

Having chosen only one of these AI stocks, my investment resides with Alphabet. The company’s journey from its humble beginnings in a Stanford garage to its current stature has been impressive. I consistently find Alphabet’s stock attractive, especially now, trading at 23% below its all-time high from February.

Should You Invest in Alphabet Currently?

Before investing in Alphabet’s stock, consider this:

The analyst team recently identified what they believe are the 10 best stocks for potential investments, and Alphabet is notably absent from this list. The selected stocks are predicted to deliver significant returns in the years to come.

For instance, when Netflix was listed on December 17, 2004, a $1,000 investment would have grown to $613,951!* Similarly, if you invested $1,000 when Nvidia was recommended on April 15, 2005, it would have ballooned to $796,353!*

Notably, Stock Advisor has achieved an impressive average return of 948%, surpassing the 170% return of the S&P 500. Don’t miss the latest top 10 list available to subscribers of Stock Advisor.

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*Stock Advisor returns as of May 12, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet and Nvidia, while The Motley Fool recommends Alphabet, Microsoft, and Nvidia. The Motley Fool also holds positions in these companies.

The views expressed here are those of the author and do not represent those of Nasdaq, Inc.