Buying and holding a single stock isn't a smart idea -- don't do it. However, it's a great idea to think about what your only stock pick could be if you were allowed only one. This will highlight how high your risk tolerance is and where you think the economy will head over the next few years.
In my mind, to buy and hold only a single stock, the company needs to have some sort of exposure or plans for generative artificial intelligence (AI) integration. Anyone not using this technology is going to get disrupted, so ensuring the stock pick has a strong AI strategy is key for success.
In the AI realm, there are few companies as strongly positioned and steady as Alphabet (GOOG 1.69%) (GOOGL 1.66%), and I think it is my top stock to buy and hold right now.
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Alphabet is an incredibly strong company
Alphabet is deeply involved in AI. The company has one of the leading generative AI models in Gemini, and this is starting to become one of the most used models. Gemini has made several impressive breakthroughs, and it has the financial backing to be able to defeat competitors based on price alone.
Another way Alphabet is benefiting from AI is through its cloud computing platform, Google Cloud. Alphabet has built excess computing capacity so it can rent it to other companies that don't have the resources to build out a data center of their own. This has become a wildly successful business unit, and Google Cloud's growth rate showcases it.
In Q4, Google Cloud's revenue rose 48% year over year. For reference, last year's Q4 growth rate was 30%, and Q3's growth rate was 34%. Google Cloud is really starting to become a huge piece of Alphabet's business, and it also provides a steady income stream.
NASDAQ: GOOGL
Key Data Points
While Alphabet is spending a ton on data centers right now, eventually, the only cost in this business unit will be to replace burnt-out or outdated hardware. This will allow the operating margin on this business unit to soar, leading to massive profits from the business that it's growing today.
Lastly, Alphabet doesn't need AI to take over the world to be a successful investment. Its core Google Search business grew revenue at a 17% pace despite being a $63 billion business that has been around for more than two decades. This base business can fund Alphabet's AI aspirations and buoy it in case the AI investment trend goes south.
Alphabet is better positioned than nearly any other company to deliver steady and long-term results, making it my top stock to buy now if I were forced to only own one.
