Alphabet’s Stock Potential: A Strong AI Leader Amid Market Challenges
Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) reached an all-time high price of $207.05 on February 4, fueled by substantial growth and earnings momentum anticipated for 2024. However, shareholders have faced difficulties in recent months as fears regarding the global economy have shaken the stock market. As of April 11, shares of Alphabet have fallen 24% from that peak.
In the face of this volatility, the ongoing artificial intelligence (AI) revolution remains unchanged. Breakthroughs in machine learning, automation, and generative AI are swiftly reshaping the global economy. Alphabet stands at the forefront of this transformation, ready to take advantage of significant long-term growth prospects.
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Here are four reasons why Alphabet is considered the best AI stock to buy presently.
Image source: Getty Images.
1. Alphabet’s AI Leadership
Alphabet’s AI strategy is distinctive, seamlessly integrating machine learning, generative AI, and automation throughout its ecosystem. The company benefits from a broad user base across market-leading platforms, including Google Search, YouTube, Android, and Chrome. This vast array of unique user data enhances its cutting-edge AI models.
Evidence of this AI strength can be found in Google Cloud, which is a key growth driver, successfully capturing impressive demand. A standout feature is the Tensor Processing Units (TPUs), a custom chip built by Google to optimize its specific AI workloads. Alphabet’s CEO, Sundar Pichai, emphasized the company’s unique advantage during the fourth-quarter earnings call, stating: “We have a unique advantage because we develop every component of our technology stack, including hardware, compilers, models, and products. This approach allows us to drive efficiencies at every level, from training and serving to developer productivity.”
Several growth tailwinds support Alphabet’s positive outlook and consolidation of AI leadership, including:
- Google Cloud and its AI solutions are well-positioned to continue capturing market share from competitors like Amazon‘s AWS and Microsoft‘s Azure.
- With 3 billion Android devices worldwide, there is a large opportunity to monetize AI applications, such as the Gemini generative AI chatbot.
- YouTube has established itself as a major player in social media, with revenue growth from subscription services positively impacting operating income.
- Alphabet’s self-driving division, Waymo, is conducting tests for autonomous rides in over 10 cities, establishing itself as an early leader in the autonomous vehicle sector.
The most promising aspect is the belief that Alphabet is only beginning its potential journey.
2. Tariff Resiliency
Alphabet’s high-quality fundamentals, scale, and diversification are essential during uncertain periods like the trade tariff challenges presented during the Trump administration.
Unlike competitors such as Amazon and Apple, Alphabet’s core digital advertising business—accounting for 78% of its revenue last year—is largely insulated from tariffs on imported goods. With more than half of its operations outside the U.S., Alphabet demonstrates resilience, suggesting it can maintain its business trajectory into the second quarter.
3. Earnings Juggernaut
After a record-breaking 2024, with a 14% revenue growth rate and earnings per share (EPS) of $8.04, Alphabet is anticipated to sustain its impressive earnings growth and robust free cash flow. Wall Street analysts foresee continued potential, projecting double-digit revenue growth in 2025 and an EPS estimate of $8.90—an increase of 11% year-over-year. Recent cost-saving efforts, like staff reductions, could enhance profitability margins beyond earnings forecasts.
Additionally, with a strong balance sheet and $96 billion in cash, Alphabet is well-positioned to withstand various macroeconomic shifts.
| Metric | 2024 | 2025 Estimate |
|---|---|---|
| Revenue | $350.0 billion | $389.3 billion |
| Revenue growth (YOY) | 14% | 11.2% |
| EPS | $8.04 | $8.90 |
| EPS growth (YOY) | 38.6% | 10.7% |
Data source: Yahoo! Finance. YOY = year over year.
4. Alphabet’s Attractive Valuation
Alphabet represents a compelling investment in AI stocks due to its favorable valuation. Trading at a forward price-to-earnings (P/E) ratio of 17, Alphabet is priced lower than its “Magnificent Seven” peers—including Apple, Amazon, Meta Platforms, Microsoft, and Nvidia—which average around 26. With Alphabet’s projected double-digit earnings growth, one could argue that its shares are undervalued.
GOOGL PE Ratio (Forward) data by YCharts
The Bottom Line
I maintain a positive outlook on Alphabet, interpreting the recent drop in stock prices as a buy-the-dip opportunity.
While risks persist—such as regulatory challenges and a shaky macroeconomic landscape—the company’s leadership in AI positions it to emerge stronger. As long as Alphabet continues to generate profitable growth, it may soon see its stock price reach new all-time highs.
Should investors consider…
Is Investing $1,000 in Alphabet a Smart Move Today?
Before you consider buying stock in Alphabet, take a moment to think about this:
The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors right now. Notably, Alphabet did not make this list. These selected stocks are anticipated to generate significant returns over the coming years.
For context, consider when Netflix was recommended on December 17, 2004. If you had invested $1,000 back then, your investment would now be worth $502,231!* Likewise, when Nvidia was highlighted on April 15, 2005, that same $1,000 investment would have grown to $678,552!*
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John Mackey, former CEO of Whole Foods Market and current Amazon subsidiary, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is also a board member. Randi Zuckerberg, former director of market development and spokesperson for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, is another board member. Dan Victor does not hold positions in any of the aforementioned stocks. The Motley Fool maintains positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. They additionally recommend long January 2026 $395 calls and short January 2026 $405 calls on Microsoft as part of their options strategies. The Motley Fool adheres to a specific disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
