Not Nvidia. Not OpenAI. This Artificial Intelligence (AI) Stock Will Be the Ultimate Winner.
Key Points
Alphabet's custom-designed AI computing units have attracted new clients.
Google Cloud is rapidly growing.
Alphabet's large language models are popular.
- 10 stocks we like better than Alphabet ›
There are few companies in the artificial intelligence (AI) space that can be considered to "do it all." Some focus on making hardware, like Nvidia (NASDAQ: NVDA) (although it has stepped into the large language model game as well); others develop large language models like OpenAI; some create AI applications; and others host AI workloads. However, there's one company that's doing nearly everything possible in AI, and it's doing quite well at it: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
Alphabet's success across so many areas of the AI trend underscores why it's a top stock to buy now.
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Alphabet's fingerprints are everywhere in the AI realm
Regardless of where you go in AI, Alphabet has likely been there.
First and foremost, it has developed a set of leading large language models (LLMs) that serve as the base of several powerful AI products. These models have already been integrated into some of Alphabet's core products, such as the Google Search engine, advertising tools, and YouTube. Users can also access the powerful Gemini model as a stand-alone product, much like they could a competing product such as OpenAI's ChatGPT.
Running these models requires a ton of computing power, and Alphabet has used plenty of Nvidia GPUs to train and run inference workloads for its LLMs. However, it didn't want to be completely tied to the Nvidia ecosystem, and it saw the writing on the wall years ago. This is why it developed custom AI chips in collaboration with Broadcom (NASDAQ: AVGO).
The Tensor Processing Unit (TPU) is the result of that relationship, and it has given Alphabet an edge over its peers in the computing landscape. TPUs can outperform GPU-based computing in many applications, but the workload must be properly configured for the TPU to be effective, and they only can handle tensor operations. However, within that niche, the TPU's prowess is so legendary that Alphabet is now selling some of them directly to third parties.
However, the chief way clients can access Alphabet's TPUs is through Google Cloud. That cloud computing division will be a long-term beneficiary of the AI build-out. Many aspiring players in the AI space don't have the resources necessary to build and equip their own AI-capable data centers, so they opt to rent computing power from a provider like Google Cloud instead. Cloud computing is billed for based on usage, which gives Alphabet a fantastic recurring revenue stream.
Alphabet is involved in nearly every part of the AI sector, whether it's models themselves, AI applications, computing hardware, or cloud computing. Furthermore, Alphabet seems to be doing quite well in all of these categories.
Alphabet's growth is impressive for its size and maturity
Alphabet won't grow as fast overall as some AI businesses you hear about because the rapid-growth parts of its business are overshadowed by its massive legacy advertising business, thanks to the Google Search engine. However, this business generates cash that Alphabet can deploy to fund its investments in AI bets, making it a less risky investment than some others in the AI sector.
In Q2, Alphabet's revenue increased by 24% while operating income rose 30%. Headlining Alphabet's growth was Google Cloud, which saw revenue grow 82% and its operating margin expand year over year from 20.7% to 35.6%.
NVDA PE Ratio (Forward 1y) data by YCharts.
Alphabet crushed its Q2 results, and Wall Street analysts expect more of the same to close out 2026 and into 2027. For Q3 and Q4, analysts expect 24% year-over-year revenue growth in each quarter. For 2027, their full-year growth estimates average 22%. Those may be high expectations, but if Alphabet can meet them, it's clearly a top stock choice.
I think Alphabet will emerge as one of the big winners of the AI boom because it is doing everything so well. This makes Alphabet stock a smart buy now; if it can keep up a 20% growth rate over the next few years, it will easily crush the market.
Should you buy stock in Alphabet right now?
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Keithen Drury has positions in Alphabet, Broadcom, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Broadcom, and Nvidia. The Motley Fool has a disclosure policy.
