Artificial intelligence (AI) continues to be the most dominant theme driving the market today. While there are a lot of good investment options in the space, if I had $1,000 and could invest in just one AI stock, my choice would be simple. I’d buy three shares of Alphabet (GOOGL 0.15%) (GOOG 0.19%), or four shares if I could spare another $200 to $250.
Alphabet is the complete AI play
The reason I’d invest in Alphabet if I could only invest in one AI stock is that it offers the most complete AI package. Alphabet is the only company that has developed both top-tier AI models and AI chips. It also has a strong AI ecosystem, with top-notch software solutions, cloud security with recently acquired Wiz, and it even owns one of the world’s largest subsea cable networks.
Image source: Getty Images.
The secret sauce behind Alphabet’s positioning is its tensor processing units (TPUs). It developed these chips more than a decade ago, and it has been improving them with new iterations ever since. The chips are battle-tested, running most of the company’s internal workflows and being used to train its Gemini foundational large language models (LLMs). While other companies are starting to develop their own custom AI chips, the process is not easy, and Alphabet has a huge head start.
Today’s Change
(-0.15%) $-0.47
Current Price
$307.22
Key Data Points
Market Cap
$3.7T
Day’s Range
$302.34 – $308.00
52wk Range
$140.53 – $349.00
Volume
2.3K
Avg Vol
32M
Gross Margin
59.68%
Dividend Yield
0.27%
Alphabet’s TPUs ultimately give it a big structural cost advantage that should just grow over time compared to competitors that still largely rely on Nvidia graphics processing units (GPUs). TPUs cost much less than GPUs and are more energy efficient, which allows the company to train LLMs and run AI inference for much cheaper. As hyperscalers (owners of large data centers) pour money into AI infrastructure, this allows Alphabet to get a much better return on its investment. This spending, meanwhile, helps it continue to create better AI models, while also fueling the growth of its cloud computing unit. It is also now starting to benefit from letting large customers deploy TPUs and order them straight through its co-developed partner, Broadcom.
At the same time, Alphabet is incorporating AI throughout its solutions to help drive growth. Google Search is its largest business, and it has developed several AI features and tools to help increase queries, including AI Overviews, Lens, and Circle to Search. It has also incorporated an AI chatbot experience into Google, as users can jump to AI Mode with just the click of a link.
Meanwhile, through its global ad network, the company is better able to monetize AI through ads. And it also has a big distribution edge through its ownership of the Chrome browser, Android smartphone operating system, and search and AI partnership with Apple.
This all positions Alphabet to be an AI leader for the long haul, and why it is the AI stock I’d buy if I could only own one.
Geoffrey Seiler has positions in Alphabet and Broadcom. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
