Artificial intelligence (AI) has been one of the most discussed subjects over the past few years. It's far from a new technology, but with the explosion in popularity of generative AI tools like OpenAI's ChatGPT, it has soared into the mainstream.

The AI landscape is layered and evolving daily. Some companies are laying the groundwork and foundation for developing the technology, others are using this foundation to build their own tools, and some are perfectly content with simply using tools, like the average user.

When it comes to companies shaping the future of AI, one of the first to come to mind is Google's parent company, Alphabet (GOOG 0.51%) (GOOGL 0.54%), which has been one of the key players in the development of AI as we know it today.

A key contributor every step of the way

What makes Alphabet so important to AI development starts with its research. Through its companies DeepMind and Google Research, Alphabet has been responsible for some of AI's biggest breakthroughs.

It developed the transformer architecture that powers large language models (LLMs); it developed an AI program called AlphaFold that predicts protein structures, allowing for faster drug and vaccine developments; and its AlphaGo program was one of the first examples of how good AI could be at solving complex issues that many thought required human reasoning.

Alphabet operates in all three phases of the AI pipeline: research and development, training and deployment, and real-world applications (Gemini, Google Search, etc.). This helps keep operations streamlined, which may not be the case with companies that rely on other companies for infrastructure or AI models. For example, OpenAI relies on Microsoft for cloud infrastructure.

The cash continues to pour in despite increased competition

Some people have voiced concerns that AI tools could harm Alphabet's core business, Google Search, by reducing the need to click on search ads when users can type the same question into a tool like ChatGPT and receive a more conversational answer.

In theory, it's a fair concern, but there haven't been any signs of this tangibly harming Alphabet's business.

Alphabet continues to be a money machine, bringing in $90.2 billion in revenue in the first quarter, up 12% year over year. This growth was led by Google Cloud, which increased its revenue by 28% year over year to $12.3 billion. It probably won't ever catch up to Google Search (56% of its Q1 revenue), but it's a high-growth area that's beginning to carry more of its own weight.

GOOGL Revenue (Quarterly) Chart

GOOGL Revenue (Quarterly) data by YCharts

Alphabet is becoming too cheap to ignore

Arguably the best thing about Alphabet's stock right now is how undervalued it seems. It's trading at 18.5 times its forward earnings, which is below the 21.7 times the S&P 500 is trading at, and well below what the other "Magnificent Seven" companies are trading at today.

For a company that has consistently grown through the years, the pessimism toward Alphabet's stock seems a bit overblown. It has top-tier in-house AI capabilities, a fast-growing cloud business (third in market share behind Amazon Web Services and Microsoft Azure), and a portfolio full of industry-leading companies like Google, YouTube, and Waymo.

I wouldn't invest in the stock expecting to double your money in a couple of years, but if you're a long-term investor, you likely won't regret investing at Alphabet's current prices. If you're concerned about current volatility and market conditions, consider dollar-cost averaging your way into a stake. The stock is a bargain.