The tech sector is doing well this year, with the Nasdaq-100 index up 21%, ahead of the S&P 500's 15% return. That growth has made tech stocks expensive. Overall, the Nasdaq-100 is trading at 39 times earnings.
There are exceptions, with Alphabet (GOOG 0.80%)(GOOGL 0.85%) being one of the biggest examples. The company that owns Google is trading at 28 times earnings, and with its recent moves, it's looking like one of the best tech stocks to buy right now.
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Alphabet is winning the AI race
The fear for Alphabet was that artificial intelligence (AI), particularly chatbots like ChatGPT and Claude, would cut into its search business. But Alphabet is usually able to take a leading position in major tech markets. It has the world's top search engine (Google), browser (Chrome), and mobile operating system (Android).
Alphabet has quickly turned AI into a point of strength, as well. Its AI Overviews feature has 2 billion monthly users, and the Google Gemini app has 450 million monthly active users, as reported on the company's second-quarter earnings call. In addition, Google and AI company Anthropic just announced an exciting partnership agreement.
The cloud partnership gives Anthropic access to up to 1 million of Google's custom-designed Tensor Processing Units (TPUs), and it's reportedly worth tens of billions of dollars. It's another sizable source of revenue for Alphabet, which produced $73 billion in free cash flow last year. The deal also reinforces Google as one of the top providers of AI infrastructure, in addition to its other AI products.
NASDAQ: GOOGL
Key Data Points
Statista is projecting that the AI market will grow by 37% per year through 2031. Alphabet will likely remain at the forefront of AI technology, and combined with its other businesses, it's well positioned to outperform the market.
