The idea of buying and holding just one stock is a tall order, considering how many great companies there are and the potential for many of them to be good long-term investments. The right company should have a mix of profitability, a wide competitive moat, and lots of potential to benefit from innovations.
Only a handful of stocks can fit this description, and one of the best ones to invest in right now and hold for the long term is Alphabet (GOOGL +1.71%) (GOOG +1.99%). Here's why.
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Alphabet's AI future is very bright
Most investors know that Alphabet's Google, specifically its advertising business, is the company's biggest moneymaker. But I want to start by explaining why Alphabet's future could be even bigger than what it's built in the past.
First, the company is a leading player in artificial intelligence. Alphabet may have misstepped by not launching some of its chatbot features before OpenAI's ChatGPT burst onto the scene a couple of years ago, but it's made big strides since then.
Its Gemini AI chatbot is available to paying Google Workspace customers and is now integrated into summary results for web searches. The company also says millions of developers are building with its AI assistant. Google recently debuted a Gemini 2.0 version that it says will bring about the "agentic era," with the bot doing more complex tasks like shopping online for users and eventually being added to smart glasses as a hands-free assistant.
NASDAQ: GOOGL
Key Data Points
These aren't just pie-in-the-sky ideas. Nvidia CEO Jensen Huang recently said he believes AI agents will be a multitrillion-dollar opportunity in the coming years. With Alphabet's Gemini already in the hands of millions of users and Gemini 2.0 on the way, the company is well positioned to benefit from AI.
The company is a leader in quantum computing
Quantum computing is still a very new and emerging technology, so Alphabet's long-term benefits in this space are anything but guaranteed. But there's so much potential for quantum computing to transform industries such as transportation, biopharmaceuticals, energy, and others that it's worth mentioning.
McKinsey estimates that quantum computing could be worth up to $2 trillion by 2035, and Alphabet recently made significant progress with its own tech when it announced its new Willow quantum computing processor.
The company said it scaled up the amount of qubits -- the units of information in quantum computing -- with Willow, which resulted in an "exponentially" fewer errors, which are often commonplace in quantum computing. Additionally, Willow performed a benchmark quantum computing task in under five minutes that would take the fastest supercomputer 10 septillion years, "a number that vastly exceeds the age of the Universe," Google Quantum AI founder Hartmut Neven said in a blog post.
While the commercial uses for Willow are still years away, quantum computing could be the next transformative tech innovation, and Alphabet is already on the leading edge.
It's highly profitable
In addition to its future tech prospects, Alphabet has built a massive moat with its online advertising business via Google. The company generated $88.3 billion in sales in the third quarter, and net income for Alphabet was $26.3 billion.
No other company has such a massive advertising business, and it's helped Alphabet line its coffers with nearly $20 billion in cash and cash equivalents. In addition, Alphabet has $17.6 billion in free cash flow, giving it plenty of money to invest in new ideas to keep itself ahead of the tech curve.
Not only is Alphabet in a strong financial position, but the company also started using some of its money to begin paying a dividend last year, adding even more shareholder value.
Alphabet's shares are well priced
For all the reasons above, Alphabet looks like a great stock to buy now and hold on to for years. And its shares look even more tempting when you consider that Alphabet's stock has a forward price-to-earnings ratio of just 22.7 right now, compared to the S&P 500's of nearly 24.
It's difficult to find a highly profitable company with several irons in the tech innovation fire that's also relatively inexpensive. If you're in the market for just one stock to own, Alphabet looks like a good bet.
