GOOG Stock Outlook: Why Now Could Be a Good Time to Load Up On Alphabet

Stocks to buy

One of the most successful and prominent companies in the world that investors should not miss out on is Alphabet stock (NASDAQ:GOOG, NASDAQ:GOOGL). Since 2004, which was their IPO year, GOOG stock has been attractive. Due to its constant stock splits, a $100 investment back in the year would be valued at $1.2 million now.

Despite its strong position in search, cloud, and YouTube, Alphabet’s stock trades at a low valuation, with a forward price-earnings ratio of 22.5-times and an EV/EBITDA ratio of 12.5-times, considering its substantial net cash. The company’s underrated AI initiatives, particularly in cloud services, contribute to its long-term appeal, aiding deal expansion.

While Alphabet may yield different returns than in its early years, it remains a solid investment for potential millionaires.

Arm-Based AI Chip

At Alphabet’s cloud computing event, partnerships and products showcased the potential for Google’s stock. Google unveiled a custom AI chip based on Arm Holding’s architecture to empower cloud customers. Additionally, the event introduced the A3 Mega AI processor utilizing Nvidia’s (NASDAQ:NVDA) H100 technology, with plans to integrate Nvidia’s Blackwell platform by 2025.

Google Cloud’s CEO, Thomas Kurian, unveiled the company’s inaugural custom AI chip, Google Axion, leveraging Arm’s AI architecture. Tailored for high-performance internet data center servers, it’s set for release in late 2024. 

Unlike past practices, Alphabet will offer these chips exclusively through cloud services for business rentals. Despite five generations of Tensor processing unit chips since 2015, Google has yet to market them directly to external clients.

Alliance with Palo Alto Networks

Amid the rise of generative AI, tech giants rush to develop training models utilizing proprietary data. Alphabet aims to license its Gemini large language model globally while expanding its cloud computing partnership with cybersecurity firm Palo Alto Networks (NASDAQ:PANW). 

The cybersecurity company reiterated its commitment to securing Google Cloud with a generous investment. Palo Alto also named Alphabet their preferred provider for infrastructure services and artificial intelligence. 

Palo Alto Network CEO Nikesh Arora is optimistic about the partnership with Alphabet. The company also to expand more of its security services in different sectors.

More Than Just a Search Engine

Alphabet currently holds the largest market share in search engines worldwide. In 2023, Alphabet reported a whopping 8% increase in revenue compared to 2022, when it had $175 billion in revenue.

In the same year, its cloud business also saw an excellent revenue growth of 26%, surpassing average growth rate. While Google Cloud recently turned profitable, its scale is crucial due to significant fixed costs. YouTube, another critical sector, saw an 8% revenue increase to $31.5 billion, with its premium services boasting over 100 million subscribers and contributing $15 billion.

Though there are concerns about AI disrupting Google’s search dominance, the potential for AI to monetize non-advertised searches presents a significant opportunity for Alphabet’s future growth.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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