Alphabet (GOOGL 0.41%) (GOOG 0.20%) stock reached an all-time high price of $207.05 on Feb. 4, riding a wave of strong growth and earnings momentum from 2024. For shareholders, the last few months have been challenging with concerns over the strength of the global economy rattling the broader stock market. At the time of writing on April 11, shares of Alphabet are down 24% from that record high.
Despite this turbulence, what hasn't changed is the ongoing artificial intelligence (AI) revolution. Innovations in areas like machine learning, automation, and generative AI are rapidly transforming the global economy. Alphabet is at the forefront of this wave, poised to capitalize on significant long-term growth opportunities.
Here are four reasons I believe Alphabet is the best AI stock to buy right now.
Image source: Getty Images.
1. Alphabet's AI leadership
Alphabet's AI strategy stands out, integrating machine learning, generative AI, and automation across its ecosystem. The company's diverse user base in market-leading platforms such as Google Search, YouTube, Android, and Chrome is an edge within the tech sector, leveraging vast amounts of unique user data to support its cutting-edge AI models.
This AI prowess is evident in Google Cloud, which has been a major growth driver capturing exceptional demand. That includes the unique Tensor Processing Units (TPUs) -- a custom chip designed by Google to power its specific AI workloads. Alphabet CEO Sundar Pichai commented on the company's unique positioning and the benefits of its vertically integrated AI strategy. In the fourth-quarter earnings conference call, Pichai said: "We have a unique advantage because we develop every component of our technology stack, including hardware, compilers, models and products. This approach allows us to drive efficiencies at every level, from training and serving, to developer productivity."
Several growth tailwinds support Alphabet's long-term outlook and AI leadership consolidation, including:
- Google Cloud and its AI solutions are well positioned to continue capturing market share from competitors like Amazon's AWS and Microsoft's Azure.
- Android's 3 billion devices worldwide offer a significant opportunity to monetize AI applications, such as the Gemini generative AI chatbot.
- YouTube has emerged as a social media powerhouse, with accelerating revenue from subscription services driving positive operating income.
- Alphabet's self-driving car unit, Waymo, is testing autonomous rides in over 10 cities and has established itself as an early leader in the autonomous vehicle sector.
The best part is the sense that Alphabet is just getting started.
NASDAQ: GOOGL
Key Data Points
2. Tariffs resiliency
I appreciate Alphabet's high-quality fundamentals, scale, and diversification, which are crucial amid the uncertainty surrounding trade tariffs under the Trump administration.
Unlike its tech peers, such as Amazon and Apple, Alphabet's core digital advertising business, which accounted for 78% of its revenue last year, is largely shielded from tariffs on imported goods. With over half of its business outside the U.S., Alphabet appears resilient, with indications suggesting it's business as usual into the second quarter.
3. An earnings juggernaut
After a record-breaking 2024 with 14% revenue growth and earnings per share (EPS) of $8.04, Alphabet is expected to continue delivering stellar earnings growth and strong free cash flow. Wall Street analysts project further upside, including double-digit revenue growth in 2025 and an EPS estimate of $8.90, representing an 11% year-over-year increase. Recent cost-saving measures, such as reported headcount reductions, could support profitability margins to exceed earnings forecasts.
With a solid balance sheet and $96 billion in cash, Alphabet is well-equipped to navigate any macroeconomic environment.
| Metric | 2024 | 2025 Estimate |
|---|---|---|
| Revenue | $350.0 billion | $389.3 billion |
| Revenue growth (YOY) | 14% | 11.2% |
| EPS | $8.04 | $8.90 |
| EPS growth (YOY) | 38.6% | 10.7% |
Data source: Yahoo! Finance. YOY = year over year.
4. Alphabet's attractive valuation
Alphabet stands out as a top AI stock because of its bargain valuation. With a forward price-to-earnings (P/E) ratio of 17, Alphabet trades at a discount to its "Magnificent Seven" peers, including AI titans Apple, Amazon, Meta Platforms, Microsoft, and Nvidia, which average around 26. Given Alphabet's double-digit earnings growth, there's a case to be made that shares are undervalued.
GOOGL PE Ratio (Forward) data by YCharts
The bottom line
I'm bullish on Alphabet, viewing the recent stock price weakness as a buy-the-dip opportunity.
While risks persist, including regulatory scrutiny and a delicate macroeconomic environment, the company's AI leadership positions it to emerge stronger. As long as Alphabet continues delivering profitable growth, it may just be a matter of time before the stock makes a new all-time high.
