Six U.S. companies have a valuation of $1 trillion or more at the moment, and each of them operates in the technology sector. However, only four of them have graduated into the $2 trillion club:

  1. Microsoft, valued at $3 trillion.
  2. Apple, valued at $2.6 trillion.
  3. Nvidia, valued at $2.2 trillion.
  4. Alphabet (GOOG 0.89%) (GOOGL 0.91%), valued at $2.1 trillion.

Alphabet is the newest member, having joined last week shortly after reporting its financial results for the first quarter of 2024. The company's strong revenue growth, profitability, and substantial progress in the artificial intelligence (AI) space sent its stock soaring 10%, which put its market capitalization above the $2 trillion mark.

Despite achieving the impressive milestone, here's why Alphabet probably isn't done creating value for investors.

Alphabet is in the Gemini era

Google Search remains the crown jewel of Alphabet's business, but it needs to adapt to a world that is increasingly dominated by AI. Chatbots like OpenAI's ChatGPT -- which powers Microsoft's Bing search engine -- are far more convenient than traditional search engines, because they answer questions directly which saves the user from sifting through countless web pages to find the information they are looking for.

Alphabet is preparing for the broad launch of AI overviews, which will transform Google Search. Users will be able to click "overview" to generate an AI summary in response to their search query, and it will also let them ask follow-up questions. Traditional search results will still display below the overview option, so this could be the perfect balance between Google's existing product and the new chatbot-style interface many people have grown to enjoy.

Gemini is Alphabet's specific answer to ChatGPT and other prominent AI chatbots. The company says it outperforms the likes of OpenAI's latest GPT-4 models across most multimodal benchmarks, which means it's better at interpreting and generating text, images, videos, and computer code. Alphabet customers can add Gemini to popular applications like Gmail and Google Docs under the Google One subscription, which has already crossed 100 million paid users.

AI products like Gemini represent a substantial financial opportunity for Alphabet. The company has six products with more than 2 billion monthly users, and the ability to charge incremental fees for AI capabilities could unlock a new phase of growth. After all, $19.99 per month for Google One sounds like a great deal when you consider that Gemini can rapidly draft emails and other content which could save the end-user copious amounts of time.

Google Cloud continues to grow rapidly

Google Search generated $46.1 billion in revenue during the first quarter, which was a 14.3% year-over-year increase. It marked the second consecutive quarter of accelerating growth, and that's important, considering it represented half of Alphabet's $80.5 billion in total revenue during the quarter.

However, Google Cloud was the fastest-growing segment across the entire conglomerate. It generated $9.5 billion in Q1 revenue, representing a 28.4% jump compared to the year-ago period. It's great news for Alphabet, because Google Cloud is trying to catch its two main rivals in the cloud computing industry -- Microsoft Azure and Amazon Web Services -- both of which generate more revenue.

AI was a significant part of Google Cloud's strong performance. Alphabet says almost 90% of generative AI unicorns (start-ups worth $1 billion or more) are using Google Cloud to develop their models. The platform offers some of the most powerful data center infrastructure in the industry for training AI, underpinned by Nvidia's leading graphics processing chips (GPUs) and Google's own chips it designed in-house.

Google Cloud also offers over 130 ready-made AI models (including Gemini) to help customers accelerate their application development. Access to the industry's most advanced models can factor into a developer's decision to choose Google Cloud over competing platforms, so it's important to continue expanding that portfolio.

An image of Google's office headquarters.

Image source: Alphabet.

$2 trillion doesn't have to be a stopping point for Alphabet

There is scope for Alphabet stock to continue delivering gains, even though it's already trading at an all-time high. The company is carefully managing costs and directing more of its resources to AI, which should improve its long-term profitability while also supporting its revenue growth.

The strategy produced a whopping 61% year-over-year increase in Alphabet's earnings per share during Q1. Based on the company's trailing-12-month earnings of $6.52, its stock trades at a price-to-earnings (P/E) ratio of just 26.5 -- that means it's 10.5% cheaper than its peers in the technology sector, represented by the 29.6 P/E ratio of the Nasdaq-100 index.

But it gets better for investors. Alphabet's board of directors just authorized a $70 billion stock buyback to return money to shareholders, which builds upon the $61.5 billion the company spent on repurchases in 2023. Plus, to the surprise of many analysts on Wall Street, Alphabet also announced it will start paying a dividend. On June 17, investors will receive a payment of $0.20 for each share they own, which translates to an annualized yield of 0.46%.

In summary, investors have an opportunity to buy Alphabet at a very attractive valuation right now, which could lead to significant returns over the long term thanks to its growing presence in AI. Plus, with the added bonus of a steady income stream, Alphabet might be the most attractive stock in the $2 trillion club.