Key Takeaways
- Alphabet is a promising way to capitalize on the AI revolution due to its diversified approach to the technology.
- The company’s growth could accelerate remarkably due to AI, and its valuation is still at an attractive level for new buyers.
- Alphabet’s AI-fueled growth potential may be underrated by the market, with its Google Gemini chatbot controlling 18% of generative AI web traffic.
- The company is poised to capitalize on a massive opportunity in the AI software market, which could grow from $122 billion in 2024 to $467 billion in 2030.
- Alphabet’s potential to sell its Tensor Processing Units (TPU) to third parties could corner a fifth of the AI chip market in the long run, translating into a $900 billion revenue opportunity.
Introduction to Alphabet’s AI Potential
Alphabet, the parent company of Google, is considered one of the best ways to capitalize on the AI revolution due to its diversified approach to the technology. As the company continues to make strides in the AI space, its growth could accelerate remarkably, and its valuation is still at an attractive level for new buyers. According to the article, "Alphabet may have stumbled initially, but its steady approach to the new tech is reaping dividends." This is evident from data provided by web analytics platform Similarweb, which points out that Alphabet’s Google Gemini chatbot now controls 18% of generative AI web traffic, more than triple its share from the year-ago period.
Alphabet’s Growing Share of the AI Market
The company’s growing share of the AI market isn’t surprising, given that it has integrated Gemini across different applications, including its Chrome browser, its Android smartphone operating system, its Google Search engine, and the Google Workplace productivity tools. As the article notes, "The company has been monetizing Gemini by offering various subscription tiers that enable users to deploy the AI assistant for generating images, creating videos, carrying out research and writing tasks, and utilizing Gemini in Gmail, Docs, and other applications." This approach could eventually allow Alphabet to make a bigger dent in the AI software market, which is estimated to grow from $122 billion in 2024 to $467 billion in 2030.
Potential Opportunities for Alphabet
There are reports that Alphabet is considering selling some of its Tensor Processing Units (TPU) — the custom AI chips that it developed in-house — to third parties. As analyst Gil Luria of financial services company D.A. Davidson notes, "if Alphabet decides to sell its TPUs to third parties, it could corner a fifth of the AI chip market in the long run." This could translate into a $900 billion revenue opportunity for the company, which is significant compared to its current revenue of $385 billion in the trailing 12 months. Additionally, the company’s Google Cloud business is growing rapidly, and its huge backlog in this segment could further drive growth.
Valuation and Growth Potential
As the article notes, "Alphabet stock has jumped by more than 76% in the past six months, and it can still be bought at an attractive 10 times sales and 28 times forward earnings — multiples that are significantly cheaper than Palantir’s." However, Alphabet may not trade at such attractive valuations for long, given its accelerating growth. The company’s potential to capitalize on the AI revolution could drive further upside in its stock price, making it an attractive investment opportunity. As Research firm Pivotal Research estimates, Gemini’s prospects could send Alphabet stock to $400, which would be a jump of 27% from current levels.
Comparison to Palantir
In comparison to Palantir, which has seen its stock jump by 2,800% over the past three years, Alphabet’s growth may be more sustainable in the long run. While Palantir’s valuation is a point of concern, with a current sales multiple of 122 and earnings multiple of 435, Alphabet’s valuation is more attractive. As the article notes, "the company will have to continue outperforming expectations by wide margins to eventually justify its current sales multiple of 122 and earnings multiple of 435." In contrast, Alphabet’s growth potential and valuation make it a more promising investment opportunity.
Conclusion
In conclusion, Alphabet is a promising way to capitalize on the AI revolution due to its diversified approach to the technology. The company’s growth could accelerate remarkably due to AI, and its valuation is still at an attractive level for new buyers. With its growing share of the AI market, potential opportunities in the AI chip market, and rapid growth in its Google Cloud business, Alphabet is poised to drive further upside in its stock price. As the article notes, "there is a good chance that Alphabet stock will sustain its newly found momentum in 2026."
https://www.nasdaq.com/articles/missed-out-investing-palantir-1-no-brainer-artificial-intelligence-stock-buy-it-soars-2026