While name changes have made the FAANG acronym dated, these high-flying stocks have handsomely rewarded investors for a long time. As a reminder, the companies are Meta Platforms, Amazon, Apple, Netflix, and Alphabet (GOOG -0.54%) (GOOGL -0.49%).

But which one now offers the best investment return? That's the key question for investors. Alphabet tops my list. I'll explain why.

Someone typing at a laptop.

Image source: Getty Images.

The cloud's not concerning

After the company's latest earnings report, some investors are fearing that Alphabet's cloud business has been losing market share. I think that's overblown.

Three companies, including Alphabet, dominate the cloud computing market. At the start of the year, Amazon's Amazon Web Services (AWS) had a 33% market share, followed by Microsoft's Azure 23%, and Alphabet's Google Cloud's 11%.

At the end of the second quarter, Google Cloud's share remained at 11%, according to Synergy Research Group. But analysts believe that fell in the third quarter. However, organizations still clamor for data, and the market's growing. Estimated at about $570 billion at the end of 2022, it's expected to grow at a 20% annualized rate through 2030 to reach $2.4 trillion, according to Fortune Business Insights.

Meanwhile, Alphabet's cloud business turned in solid growth. The unit's third-quarter revenue rose by 22.5% to $8.4 billion.

The cloud business generated 11% of Alphabet's quarterly revenue. While not insignificant, the company has more important sources of revenue.

Strong advertising

Alphabet derives the major portion of its revenue from advertising. And it remains a juggernaut. With its algorithms and popular sites, it steers the appropriate ads to users.

It has a range of well-known products, such as its search engine (over a 90% global market share per StatCounter), Google Maps, Google Play, and YouTube. These platforms and Alphabet's technology continue to drive advertising revenue growth.

In the latest quarter, advertising revenue increased by 9.5% to $59.6 billion. It's also highly profitable. Google services, which includes advertising, grew its operating profit to $23.9 billion from $18.9 billion.

Relative valuation

Alphabet has two classes of stock. The A shares have voting rights while the C shares do not. Both have strong gains this year, up 54% and 53%, respectively. That compares to the S&P 500's 18% increase.

The valuation, measured by the price-to-earnings ratio (P/E), has grown more expensive. Both shares have a P/E multiple of about 26 compared to under 20 at the start of 2023.

Still, compared to the S&P 500's P/E of 25, the Alphabet shares don't look expensive. After all, Alphabet has dominant market positions in areas such as search that make it an advertising juggernaut.

A strong business at a reasonable valuation adds up to an attractive investment opportunity. After all, to quote Warren Buffett, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."