A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold For a Decade

A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold For a Decade

Artificial intelligence (AI) has generated a lot of buzz since the start of last year. Even though the technology has been around since the 1950s, recent developments show that these algorithms have improved significantly. Generative AI has shown its mettle for an ever-widening variety of tasks, including streamlining processes, creating original content, and increasing productivity, with a flood of new applications on the drawing board.

Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) CEO Sundar Pichai insists these algorithms will change virtually everything. “Over time, AI will be the biggest technological change we see in our lifetimes. It’s bigger than the move from desktop to mobile, and it could be bigger than the Internet itself. even.”

The opportunity is huge. THE Generative AI The market is expected to be worth between $2.6 trillion and $4.4 trillion annually over the coming decade, according to global management consulting firm McKinsey & Company. Companies at the forefront of this technological shift will be among the first to benefit from this expected windfall, thus enriching investors.

Many companies will benefit from AI, but I think Alphabet represents a particularly exciting opportunity.

A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold For a Decade

Image source: Getty Images.

An industry leader and more

To understand the scale of this opportunity, it is important to view AI through the lens of Alphabet’s existing business interests, which are considerable.

Google has been the search leader for nearly a quarter century, most recently controlling 91% of the market, according to Internet statistics aggregator StatCounter. The company has constantly improved its algorithms over the years and, in doing so, has become the gold standard for technology.

Its search engine is the company’s industry-leading digital advertising channel. It is estimated that Google ultimately controlled about 39% of the market, according to online data company Statista. The company’s advertising efforts are well documented, and while many competitors have emerged over the years, Google continues to hold the top spot.

After years of stagnation, the digital advertising industry is poised for a long-awaited recovery, which will benefit Alphabet. Indeed, the company just posted its best year-over-year revenue growth rate in nearly two years, with digital advertising leading the way.

Let’s not forget Google Cloud, the world’s third largest cloud infrastructure provider. While he’s still hanging around Amazon Web Services (AWS) and Microsoft Azure, No. 1 and No. 2 respectively, is growing faster than the industry average. Google Cloud grew 28% year-over-year in the first calendar quarter, outpacing AWS’s 17% growth but lagging Azure’s 31% growth.

Gemini, the twins

Alphabet’s twin offerings, Google Search and Google Cloud, represent two distinct ways for the company to take advantage of recent advances in generative AI.

Late last year, Alphabet unveiled Gemini, the company’s “largest and most capable AI model.” This week at Google’s I/O 2024 developer conference, it introduced a host of cutting-edge new features designed to help Google maintain its grip on the search market and make its ancillary services more robust.

Gemini will use generative AI to organize the display of search results and offer AI previews for more complex queries. It also allows video search, through which a user can ask a question and upload a short supporting video to find answers. Additional features, including meal and travel planning, are currently being tested in Search Labs and are expected to be released to the public later this year.

The second part of Alphabet’s opportunity lies in the company’s cloud AI offerings. At Google’s Cloud Next event last month, the company announced that Gemini 1.5 Pro, its flagship large language model (LLM), was available for public preview on its Vertex AI platform. This week, Alphabet highlighted Gemini’s multimodal capability, calling it “a frontier model designed to be natively multimodal from the ground up, which (can) reason through text, images, video, code, and more.” This gives developers the ability to create complex and flexible AI models from scratch.

The Vertex AI platform now offers more than 150 pre-built AI models, including Google’s own, open source and third-party models. With these, Google Cloud customers can accelerate their own AI development “to build, deploy and scale AI-driven applications,” according to the company. There’s also Duet AI, which was “specially trained to help users be more productive on Google Cloud.”

Generative AI will not only help Google maintain its lead in search, but it will likely help the company gain market share in the cloud.

Historically inexpensive

Although it offers many other products and services, Alphabet offers an interesting combination of search services, digital advertising and cloud infrastructure – and each of its main business segments will benefit from a boost from the AI.

Despite all these opportunities, Alphabet stock is attractively priced, selling at around 26 times earnings, cheaper than Alphabet stock. price/earnings ratio (P/E) from the 27th for the S&P500 — even if Alphabet’s stock has been delivered triple stock index returns over the past decade. This makes Alphabet a once-in-a-generation investment opportunity.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Danny Vena holds positions at Alphabet, Amazon and Microsoft. The Motley Fool holds positions and recommends Alphabet, Amazon and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold for a Decade was originally published by The Motley Fool

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