Artificial intelligence (AI) could be the greatest game-changing technology ever. However, some believe quantum computing will be even bigger than AI. Autonomous ride-hailing services, commonly known as "robotaxis", could bring another tectonic shift to society.
Investing in any of these hot areas could lead to tremendous gains over the next decade. But you don't necessarily have to buy multiple stocks. Here's one "Magnificent Seven" stock that has it all.
Checking off all the boxes
Google parent Alphabet (GOOG 3.25%) (GOOGL 3.85%) has pioneered AI for years. Its researchers developed transformers (the "T" in ChatGPT) that paved the way for today's large language models (LLMs).
NASDAQ: GOOGL
Key Data Points
The company remains one of the top AI leaders. Google Gemini ranks among the most powerful AI models around. Google Cloud offers a wide range of AI tools to customers. Google Search, YouTube, and Alphabet's other products use AI extensively.
While classical computers use bits (0s or 1s), quantum computers use qubits (quantum bits) that can be 0, 1, or both simultaneously. They can also be "entangled" with other qubits that are far away. These characteristics hold the potential for quantum computers to process more information much more quickly than classical computers. Google's recent introduction of its new Willow chip could be a key breakthrough in developing a useful, large-scale quantum computer.
Alphabet's Waymo unit is at the head of the pack in offering robotaxi services. Waymo already offers autonomous ride-hailing in Los Angeles, Phoenix, and San Francisco. It's planning to soon expand into Austin, Atlanta, and Miami.
Sure, there have been a few highly publicized glitches with Waymo's service, including an incident where one of its robotaxis drove around in circles in a parking lot repeatedly. However, the self-driving technology is usually reliable and continues to improve. Investors shouldn't dismiss the potential for Waymo to become a major growth driver for Alphabet over the next few years.
More magnificent than most
AI should serve as a key tailwind for all the Magnificent Seven stocks. Some of them could be winners in quantum computing as well, notably including Amazon, Microsoft, and Nvidia. Amazon, Nvidia, and Tesla are focusing on the robotaxi market in different ways.
But none of the other Magnificent Seven members is as much of a leader in all of these technologies as Alphabet. The company also is more magnificent than most in other important ways.
If cash is king, Alphabet sits on the throne. The tech giant's cash, cash equivalents, and short-term investments of $93.2 billion are greater than any other Magnificent Seven company's cash stockpile. Alphabet is very well-positioned to continue investing in research and development in AI, quantum computing, and robotaxis.
Its stock is also one of the cheapest among the Magnificent Seven based on growth prospects. Only Nvidia has a lower price-to-earnings-to-growth (PEG) ratio than Alphabet's PEG multiple of 1.27.
Two things to watch
Investors should keep their eyes on two things that could negatively impact Alphabet. First, a federal judge ruled in August 2024 that Google broke antitrust laws by creating an illegal monopoly in the search engine market. Google is also embroiled in antitrust litigation related to its digital advertising practices. Second, some believe that generative AI presents a huge threat (perhaps even an existential one) to Google Search.
However, Google is appealing the decision about its alleged monopoly in search. Some legal experts believe the company's case is strong and expect relatively narrow remedies rather than major changes that hurt its business.
As for the generative AI threat, Google Search already incorporates genAI with its AI Overviews. Google's advertising revenue from search continues to grow. Alphabet and Google CEO Sundar Pichai stated in the company's third-quarter earnings call that the new feature is increasing search usage and user satisfaction. He added, "The integration of ads within AI Overviews is also performing well, helping people connect with businesses as they search."
Perhaps these issues could become greater problems for Alphabet, but I'm optimistic that they won't. I think Alphabet's leadership in AI, quantum computing, and robotaxis make it one of the best Magnificent Seven stocks to buy right now.
