If I could own only one stock, my choice would be Alphabet (GOOGL +3.15%) (GOOG +3.57%). The reason is simple: It’s the most complete artificial intelligence (AI) company, with multiple advantages built in, and I think it can win whether AI infrastructure spending continues to rise or levels off.
Alphabet’s biggest edge is that it has its own powerful custom AI chips. It developed its Tensor Processing Units (TPUs) more than a decade ago and has built its entire software and hardware ecosystems around these chips to optimize their performance. This gives the company several advantages.
First, it allows it to train its AI models much more cheaply than competitors and to run inference most cost-effectively. This also lets it offer its cloud computing customers a cheaper alternative that has higher margins for itself. Alphabet’s TPUs are so well regarded that it has even let Anthropic place large orders for them, adding another high-margin revenue stream.
Image source: The Motley Fool.
Meanwhile, Alphabet has taken its TPU-trained AI model, Gemini, and embedded it throughout its platform, including in Google Search. Innovations such as AI Overviews and AI Mode have helped drive query and revenue growth for its core search business, while AI features like Lens and Circle to Search have also been a tailwind.
Alphabet also has a huge distribution advantage from which it benefits. Its Chrome browser and Android smartphone operating system each have about a 70% market share, and the company also has a search revenue-sharing deal with Apple to be the default search engine on its devices. This essentially makes Google the gateway to the internet for most people, and it’s introduced AI into how people have been accustomed to using the internet, so they don’t need to switch to a separate app to use AI chatbots.
Today’s Change
(3.15%) $11.33
Current Price
$370.84
Key Data Points
Market Cap
Day’s Range
$357.78 – $373.64
52wk Range
$180.48 – $408.61
Volume
964.2K
Avg Vol
31.3M
Gross Margin
60.43%
Dividend Yield
0.23%
At the same time, Alphabet’s global ad network helps the company monetize consumer AI better than most competitors. It can serve the range from global brands to small mom-and-pop shops down the block. Advertising is a two-sided business, and Alphabet has both a huge global audience and the trust of advertisers.
In addition to its AI bets, Alphabet has one of the world’s largest video platforms, YouTube, and the company should benefit from the continued rise of short-form video. In addition, Alphabet has solid emerging bets, led by its Waymo robotaxi business, which is quickly expanding across the country. The company is also investing in quantum computing.
Overall, Alphabet is a great combination of leading and emerging businesses. Best of all, its stock should win whether AI spending continues to accelerate or levels off. If it continues to accelerate, that means the company is getting a strong return on its investment, and it can continue to press its TPU cost edge. If spending levels off, the stock will then start to generate massive free cash flow, and its stock multiple could expand. Either way, Alphabet looks like a great long-term investment.
