Artificial intelligence (AI) has captured the minds of investors and companies alike. Spending on AI infrastructure is through the roof, as is demand for AI tools and services. Not surprisingly, many stocks have benefited from the trends in AI over the past few years.
That said, if there were one AI stock I’d be putting in my retirement portfolio before the end of this year, it would be Alphabet (GOOGL +0.03%) (GOOG +0.03%). The reason is quite simple, as it’s the most complete AI company with several built-in advantages.
Today’s Change
(0.03%) $0.10
Current Price
$388.93
Key Data Points
Market Cap
$4.7T
Day’s Range
$385.17 – $390.42
52wk Range
$162.00 – $408.61
Volume
212.3K
Avg Vol
28.1M
Gross Margin
60.43%
Dividend Yield
0.22%
The most complete AI stack
Alphabet has the most complete AI stack of any company, highlighted by its Gemini AI models and its custom Tensor Processing Units (TPUs). The company has many advantages in the AI race, but it all starts with its TPUs. Alphabet developed these custom chips more than a decade ago, designing its entire software and hardware stacks around them. This has given it a big head start in a world where cheaper, more efficient computing power is king.
By owning its own custom chips designed specifically for its ecosystem, Alphabet has a huge cost edge in the AI race. It can get more bang for its buck with its AI infrastructure spending, while also training its Gemini model and running inference at a much lower cost compared to rivals that largely depend on Nvidia graphics processing units (GPUs). This also gives it a cost advantage through its fast-growing cloud computing business and helps it achieve better economics by having both its own chips and models. Its chips are also so highly regarded that it is now letting its co-developer, Broadcom, sell them directly to select customers, opening up another high-margin revenue stream.
Image source: The Motley Fool.
Alphabet also has a big distribution advantage when it comes to monetizing AI in the consumer market. By owning the world’s most used browser and smartphone operating system, together with a search revenue-share deal with Apple, its Google Search engine is essentially the gateway to the internet for much of the world. At the same time, its global ad network gives the company a strong avenue to monetize its AI efforts. This has allowed Alphabet to embed Gemini throughout its solutions, including Google Search, to successfully drive revenue growth.
Alphabet has successfully positioned itself as the leader in the huge consumer AI market, and it looks like it will be the biggest winner in this arena. As the most complete AI player and given all its advantages, this is the AI stock I want to own in my retirement account for the long term.
Geoffrey Seiler has positions in Alphabet and Broadcom. The Motley Fool has positions in and recommends Alphabet, Apple, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.
