One stock that divides many investors at this time is Alphabet (GOOGL -0.01%) (GOOG 0.06%). A big reason some investors are bearish on the name is that they believe artificial intelligence (AI) will disrupt its highly profitable search business. While certainly a risk, I don't think that is going to happen.
Let's look at four reasons why I'm bullish on the stock to the point where I would recommend buying it like there is no tomorrow.
1. Alphabet has search advantages and opportunities
AI is potentially one of the biggest technological advancements of our generation. However, while it is very good at many things, there is good reason to believe that AI chatbots won't replace search. Cost is one main issue. Running AI queries is much more costly than search queries, which is why there are often limits placed on the number of queries someone can run, and paid tiers.
Image source: Getty Images.
Investors recently got a peek into the amount of money that AI search start-up Perplexity AI is losing for trial users and users on its free tier, as the company spends heavily on third-party AI models and cloud computing services. Meanwhile, OpenAI said that it loses money on its $200-per-month ChatGPT Pro plan. In addition, there will continue to be a large number of people who will not spend money on AI and prefer free, ad-supported search.
And when it comes to ad-supported search, whether it be powered by AI or regular search, Google has established a wide moat through its distribution and ad network advantages. The company's search engine is preinstalled and the default engine for billions of devices. Its Android operating system has about a 70% market share in the smartphone market, while its Chrome browser has a 66% market share. Both use Google as their default search engine.
Meanwhile, it has a revenue-sharing deal with Apple to be the default search engine on its devices through Safari, which helps it capture much of the rest of the market. It even has revenue-share deals with other browsers, such as Opera, to be their search engine.
At the same time, Alphabet has created one of the largest ad networks on the planet. Early on, the company built up its ability to serve local markets through location-based ad targeting and letting local businesses create free listings to improve their presence on search. Meanwhile, its self-service platform makes it easy for local businesses to run campaigns themselves. With a huge user base, Alphabet can connect advertisers with consumers on everything from a global to a local level.
Typically, for a search query to be monetized, there must be some form of commercial intent, which is why Google has historically only displayed ads on about 20% of searches. This also highlights the significance of Alphabet's latest AI-powered search updates. With the launch of its new AI mode, the company added several commerce-focused features aimed at enhancing monetization.
One standout is "Shop by AI," which allows users to find products simply by describing them, virtually try on clothes using a photo, and even track prices. Google also introduced generative AI capabilities that can perform tasks like finding the best ticket deals across platforms from sites such as Ticketmaster and StubHub. These innovations could help drive new ad opportunities over time.
Between Google's unmatched distribution, massive ad network, strong data advantage, and the growing strength of its Gemini AI model -- not to mention its renewed focus on commerce -- I see AI as more of a long-term opportunity for Alphabet than a threat.
2. Google Cloud is driving Alphabet's growth these days
While much of the investor focus has been on Google search, Alphabet's cloud computing unit, Google Cloud, has been a strong growth driver for the company. Cloud computing is a high-fixed-cost business, and Google Cloud has recently gained enough scale to cover its fixed costs, hitting a profitability inflection point. This was seen in its results in the first quarter of 2025, where the unit grew its revenue 28% year over year to $12.3 billion, while its segment operating income soared 142% to $2.2 billion.
Google Cloud is seeing momentum as customers use its Gemini foundational models to build and customize their own AI tools, then run those workloads on its infrastructure. Its Vertex AI platform, meanwhile, makes it easier for organizations to build, deploy, and manage models all in one place.
At the same time, Google Cloud continues to lean into its strengths in data analytics with tools like BigQuery and its leadership in Kubernetes, which are software packages that bundle apps with everything they need to run.
Alphabet is investing heavily in data center infrastructure to keep up with demand, and this should be a strong, growing business in the year ahead. Meanwhile, the company has a cost advantage through the development of its own custom AI chips that consume less power, lowering its cost of ownership over time.
3. Waymo has a first-mover advantage
Another big potential growth driver for Alphabet that should not be overlooked is its Waymo robotaxi business. The company has gotten a big first-mover advantage in the U.S. and has started to see rapid growth as it expands to more cities. Meanwhile, it has recently teamed up with Uber Technologies in a few cities to gain access to its large distribution platform and for help with fleet management services, such as cleaning, maintenance, and charging its vehicles.
Waymo is now providing over 250,000 paid robotaxi rides per week, and Uber reported that in Austin, Texas, Waymo vehicles were busier than 99% of its human drivers in the city, based on trips per day. As the technology gains traction, it's likely that adoption in new cities will accelerate even faster.
Alphabet will still likely need to lower the costs of its technology for this business to become profitable, but it is a huge opportunity.
4. Alphabet currently sports a cheap valuation
With investors seemingly unable to see the forest for the trees of late, Alphabet has been left with a very cheap valuation. The stock currently trades at a forward price-to-earnings ratio of 18 times based on analysts' estimates for 2025.
For a company with a strong collection of market-leading and emerging growth businesses, that valuation is just too cheap. Alphabet is one of the least expensive megacap tech stocks tied to AI, and this is a great time to pick up shares on the cheap.
