NVIDIA reached a major milestone last year. The leader in artificial intelligence (AI) chips became the world’s largest company when it reached $4 trillion in market value. But the company did not stop there. Nvidia has continued to advance and today remains the largest company, but now worth more than $5 trillion.
In recent years, Nvidia, Appleand microsoft each of them has spent time in this leadership position. However, in recent times, another AI giant has surpassed both Apple and Microsoft. And while this company is still less valuable than Nvidia, it has actually seen a steeper rise in its market cap than the AI ​​leader so far this year. Is This Trillion-Dollar AI Stock A Buy Now? Let’s find out.
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Playing a key role in AI
This company plays a key role in the AI ​​story, developing AI for its own use and offering AI products and services to customers through its cloud business. I’m talking about Alphabet(NASDAQ:GOOG)(NASDAQ:GOOGL). You may know this player best through something you could use every day: Alphabet’s Google Search. And this has been the ticket to most of the revenue over time: Google sells advertising on its platforms and companies are eager to buy because they know they can reach their audience there.
Alphabet today uses its Gemini big language model to drive innovation across the entire Google platform, making the search and advertising experience easier and more cost-effective for customers. All of this should support advertising revenue growth going forward.
But where the company really stands out in AI is through Google Cloud, its cloud services business. Here it offers customers access to Gemini, a wide variety of chips and many other AI products and services. And this has increased cloud revenue. For example, in the last quarter, Google Cloud’s revenue soared 63% to $20 billion. Therefore, Alphabet, along with Nvidia, is at the heart of this AI revolution, participating in a market that may surpass $2 trillion by the end of the decade.
So it’s not exactly surprising that Alphabet stock has risen, driving up the market value. So far this year, Alphabet’s market capitalization has increased 20% to $4.5 trillion. That’s because Nvidia’s is up 12%.
GOOG Market Cap Data by YCharts
As mentioned, Alphabet’s market capitalization surpassed that of Apple and Microsoft just a few weeks ago, making it the second largest company in the world. Apple has since regained the spot, but by a very narrow margin.
GOOG Market Cap Data by YCharts
An action with momentum
Now the question is: Is Alphabet a buy right now? It’s clear the stock has momentum, and that momentum is well deserved. The company offers a long track record of earnings growth and its position in the AI ​​market suggests it can continue to benefit as the AI ​​story develops. The ability to run workloads is in high demand and as AI is applied to real-world problems, this should continue.
In the latest quarter, Alphabet said its cloud backlog nearly doubled sequentially to $462 billion, and about half of that will translate into revenue over the next two years.
The company is also making its mark in the chip space and aims to deliver its TPUs to select customers’ data centers; This is a new source of income for Alphabet.
Therefore, an investment in Alphabet can provide the investor with the security of a well-established technology company, as well as the opportunity to benefit from an AI-driven growth story. This makes it an attractive position for both cautious and aggressive investors. Right now, Alphabet stock is not at its cheapest level. It trades for 26 times forward earnings estimates; While that’s down from 30x at the end of last year, it’s higher than the level of around 20x just a couple of months ago. Still, at its current level, it remains reasonably priced, making it an excellent addition to long-term portfolios seeking safety and growth.
Should you buy Alphabet stock right now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Alphabet, Apple, Microsoft and Nvidia. The Motley Fool has a disclosure policy.
This trillion-dollar AI stock has seen a steeper rise in its market cap than Nvidia this year. Is it a purchase? was originally published by The Motley Fool
