In the past 15 years, Alphabet's (GOOG 1.94%) (GOOGL 2.00%) shares have skyrocketed, recording an annual compound growth rate of 20.84% over this period, which is miles ahead of the long-term average for the S&P 500 index. That's impressive, but Alphabet is now a $3.4 trillion stock. Can the company still deliver the kinds of performances that will set up investors who buy its shares today for life?
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Alphabet's multiple growth paths
Alphabet is best known for its leading search engine, Google. Through this business, the company generates billions of dollars in advertising revenue every year. That should remain the case for a long time. Alphabet has a wide, nearly impregnable moat in this industry thanks to deep network effects and a strong brand name. That's why it is the leading digital ads company in terms of sales.
Even though artificial intelligence (AI) chatbots threatened its search dominance, Alphabet has quickly adapted. So, this business should remain an important long-term growth avenue. However, Alphabet has several others. The company's work in AI and cloud computing is helping drive strong sales growth, and we are arguably still in the early innings of those. Alphabet has the third-largest share in the massive, fast-growing cloud computing market.
And in this area, it benefits from high switching costs.
NASDAQ: GOOGL
Key Data Points
Alphabet's streaming ambitions are also contributing to its growth. The company dominates television viewing time and generates plenty of subscription revenue and ad sales through YouTube. That's yet another long-term opportunity. Then there is the company's work in autonomous vehicles, which are slowly gaining traction across many major U.S. cities. Alphabet's multiple avenues for growth make the stock attractive.
Don't forget to diversify
Could Alphabet set investors up for life? My view is that it can help, but it's important not to put all your eggs in one basket. Alphabet is a great pick to be one of the largest holdings in a well-diversified portfolio that could generate above-average market returns over the next decade (and beyond), helping significantly increase patient investors' wealth in the process.
