Key Points
Alphabet (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN) are currently trading at lower price-to-earnings (P/E) ratios of 17 and 20.9, respectively, compared to the S&P 500’s ratio of 24.2. This makes both tech giants appear more affordable than the broader market.
In their latest earnings report, Alphabet revealed a notable $98 billion in “other income” primarily influenced by gains from its investments in AI firm Anthropic and SpaceX. Amazon’s valuation was similarly affected by gains related to its investment portfolio, including a stake in Anthropic, valued at $965 billion in May. Analysts anticipate that when assessing future earnings, Amazon will trade at 25 times next year’s expected earnings and Alphabet at 23 times.
Despite the apparent discrepancies in their valuations driven by investment gains, both companies are expected to experience significant growth in the coming years, largely due to their positions in the expanding AI and cloud computing markets.
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