With the market experiencing a recent pullback, many investors are likely scouring their watchlists for high-quality stocks trading at a discount. And while several big tech names have taken a hit recently amid concerns over massive infrastructure spending, one company stands out as an especially compelling opportunity: Alphabet (GOOG 0.98%)(GOOGL 1.00%).
Shares of the search giant have cooled off, trading down from their recent all-time high of about $350 to around $306 as of this writing. But despite the growth stock’s recent breather, the underlying business is performing exceptionally well.
The company is benefiting from artificial intelligence (AI) both directly through its enterprise cloud business and indirectly across its sprawling consumer ecosystem. For investors looking for a resilient AI stock to buy today, here is why Alphabet is my top pick.
Image source: Getty Images.
A booming, highly profitable cloud business
When investors think of Alphabet, they often think of digital advertising. But the company’s cloud computing business, Google Cloud, is quickly becoming the star of the show.
Highlighting the company’s underlying momentum, Alphabet’s fourth-quarter revenue rose 18% year over year to $113.8 billion. Fueling this top-line acceleration was a staggering 48% year-over-year jump in Google Cloud revenue to $17.7 billion.
Even more, this cloud revenue is flowing nicely to Alphabet’s bottom line.
Google Cloud’s operating income more than doubled year over year to $5.3 billion. Further, the segment’s operating margin expanded from 17.5% in the year-ago quarter to 30.1% in the fourth quarter. This segment margin expansion suggests that Google Cloud has finally achieved the scale needed to meaningfully drive Alphabet’s consolidated earnings rather than just subsidizing its top line.
And that momentum is well supported by backlog growth. Capturing the unique predictability of its enterprise demand, Google Cloud ended 2025 with a massive $240 billion backlog — up 55% sequentially.
Adding some context to the segment’s uncanny growth — especially with larger customers — CEO Sundar Pichai noted during Alphabet’s fourth-quarter earnings call that “The number of deals in 2025 over $1 billion surpassed the previous three years combined.”
Efficiencies across the AI ecosystem
Beyond enterprise cloud contracts, Alphabet is actively threading AI into the products that billions of consumers use every day. AI is enhancing products across Alphabet’s core search business, YouTube, and Google Workspace.
With that said, the transition to an AI-first world is incredibly expensive.
Alphabet’s capital expenditures, or spending on physical assets such as data centers and servers, totaled $91.4 billion in 2025. And management expects 2026 capital expenditures in the range of $175 billion to $185 billion.
A spending surge of this magnitude can make investors nervous about the company’s future free cash flow, or its cash flow from operations less capital expenditures.
But Alphabet is getting smarter about how it deploys this technology. The company is actively utilizing AI to improve the engineering efficiency of its own workforce, and it’s always looking for ways to enhance efficiencies in its data centers.
“We were able to lower Gemini serving unit costs by 78% over 2025 through model optimizations, efficiency and utilization improvements,” Pichai explained during the call.
Priced for reality, not perfection
Of course, there is a reason the stock has pulled back recently. Wall Street is worried that heavy AI investments will weigh on profit margins in the near term.
But at today’s price, the market seems to be more than accounting for these risks. As of this writing, Alphabet trades at a price-to-earnings ratio of about 28 — not a cheap valuation but definitely an attractive one given Alphabet’s recent business momentum.
With that said, there are scenarios in which the stock couldn’t work out well from here. The biggest risk is that its major cloud computing investments don’t deliver adequate returns. But another key risk is the company’s heavy dependence on advertising — something that could take a hit in a weak macroeconomic environment.
Ultimately, however, I believe Alphabet offers one of the most balanced risk-reward profiles among AI stocks today. The company has a diversified, cash-rich business and a rapidly accelerating cloud segment.
If you are looking to buy the dip, I think this is a great place to start. Of course, this doesn’t mean this is the bottom. Shares could fall even more. But I do think that the stock will perform well over the long haul from here.
