The share price of Alphabet (GOOG 1.47%) (GOOGL 1.45%) surged to new highs in 2025. Some investors might be hesitant to buy a stock after a 78% rise over the last six months, but the stock still trades at a reasonable valuation. The stock's forward price-to-earnings multiple of 29 is higher than a year ago, but it appears justified given Google's advantages in artificial intelligence (AI).
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Why buy Google stock
Google has built a competitive advantage in the most disruptive technology ever created. The company has spent years investing billions in chips and data centers for AI training. Its AI chips are a strong draw for customers in Google Cloud seeking an optimal balance of compute performance and cost. Revenue from cloud services surged 34% year over year in the third quarter.
Moreover, AI search features are boosting user engagement in the company's largest business, Google Search, which grew advertising revenue 14% year over year last quarter.
While dependency on advertising can lead to weaker growth during a recession, Google is building multiple revenue streams across subscriptions (e.g., Google One and YouTube Premium), products, cloud services, and potentially its Waymo self-driving car business. Analysts expect its earnings per share to grow at a 15% annualized rate over the next several years, which should deliver market-beating returns for shareholders.
