Artificial intelligence (AI) has certainly had an effect on the stock market over the last few years. In particular, a small collective known as the "Magnificent Seven" -- Nvidia, Apple, Microsoft, Amazon, Meta Platforms, Tesla, and Alphabet (GOOGL 1.67%) (GOOG 1.76%) -- are pushing the frontiers across next-generation hardware and software.
One company that is only just beginning to earn its position in the AI spotlight is Alphabet, whose shares blasted 65% higher last year. Perhaps one of the most telling signs that Wall Street is bracing for even more upside in Alphabet stock is the sheer number of high-profile institutional investors pouring into the stock.
Let's dig into what separates Alphabet from its mega-cap peers, and assess why now is a great time to buy the stock hand over fist and prepare to hold for the long haul.
Image source: Getty Images.
Alphabet is a money printing machine
Alphabet generates revenue through a host of different products and services. The company's crown jewel is its advertising empire, which spans internet platforms Google and YouTube.
The company also has a subscription component tied to its streaming service, as well as its consumer electronics division, Android. Lastly, Alphabet is beginning to make a splash in the world of cloud computing against rivals such as Amazon Web Services (AWS) and Microsoft Azure.
The company's services segment -- which accounts for advertising, subscriptions, and devices -- is massively profitable. Through the first nine months of 2025, Google Services generated a 40% operating margin. Meanwhile, Google Cloud Platform (GCP) reported a 21% margin.
GOOGL Net Income (TTM) data by YCharts.
On a trailing 12-month basis, Alphabet has been the most profitable AI business among the major hyperscalers. The company has slowly and methodically allocated its profits across many different areas in the AI value chain. Let's dig into how Alphabet is swiftly evolving from an internet giant to a full-spectrum AI powerhouse.
Alphabet's vertically integrated ecosystem is unrivaled
One thing that makes Alphabet's business model successful is its ability to vertically integrate its various operations. A vertically integrated company is one that controls numerous aspects of its own value and supply chain, as opposed to outsourcing its needs.
NASDAQ: GOOGL
Key Data Points
At the research layer, Alphabet owns a laboratory called DeepMind which it uses to help refine its AI model, Gemini.
At the computer layer, Alphabet is deploying its own custom silicon solution -- tensor processing units (TPUs). Alphabet collaborates with Broadcom for its TPU designs. But the bigger idea is that the company has now unlocked new ways to compete with incumbent cloud infrastructure providers and migrate away from a full Nvidia GPU stack.
When it comes to infrastructure, Alphabet has invested heavily in capital expenditures (capex) over the last three years to build out data centers around the globe. Its robust profitability profile allows the company to make these infrastructure investments on a continued basis.
Alphabet is beginning to complement its data center buildouts with efficient energy infrastructure, thanks to its $4.7 billion acquisition of Intersect. This move should provide Alphabet with flexibility related to energy capacity constraints as AI workloads expand. As such, the company need not rely as much on external power suppliers.
By building such a diversified ecosystem, Alphabet is paving the way for cheaper training and inference costs as AI becomes more integrated at the enterprise level. As a result, the company appears more than well-positioned to usher in a wave of continued revenue acceleration bolstered by further profit margin expansion.
What makes Alphabet a forever stock?
Alphabet is not a company that revolves around a single product lifecycle. What started as a search engine has masterfully evolved into a multifaceted platform serving consumers and businesses alike. Even a modest investment of $1,000 at Alphabet's IPO is now worth six figures -- solidifying the long-term thesis.
GOOGL Total Return Price data by YCharts.
Today, the company should be seen through the lens of an AI ecosystem -- a trend that could prove transformational over the coming decades.
With AI still in its early stages, Alphabet's trajectory feels like the start of a decades-long arc of compounding, market-beating returns. In my eyes, Alphabet is a rare example of a stock to buy and hold forever.
