Smartest AI Stock to Buy Now
It’s easy to get caught up in the hype of Nvidia but perhaps the smartest stock to buy now is Alphabet (GOOGL). Across the gamut of products and services offered by Alphabet, a whole new world of revenues opens up when AI is factored in.
We delve in to explore just how large the opportunity is for Alphabet and potentially for shareholders over the next few years.
Key Points
- Alphabet has opportunities to apply AI to enhance revenues in flagship offerings like Google Search and YouTube.
- Beyond the obvious areas of application, Alphabet can leverage its AI expertise to grow revenues in healthcare, online shopping and even cybersecurity.
- Analysts remain bullish on the firm’s prospects and offer double-digit percentage upside price targets.
How Google Can Boost Revenues
In its flagship search engine, Alphabet has already leveraged artificial intelligence to enhance search accuracy and relevance. The consequence will be to boost user engagement and ad revenues that are crucial to Alphabet’s revenues and profits.
The company’s cloud computing applications offer another growth lever and there AI can be used to improve data analytics, machine learning services and other cloud solutions. The success of these initiatives should attract more clients to a business unit that hasn’t rivaled Amazon yet in success, but AI could accelerate its growth trajectory.
Another giant division under the Alphabet umbrella is YouTube where AI algorithms have the potential to curate and recommend personalized content and boost user engagement. The longer the audience’s attention span the more ad views and revenues will spike.
Beyond the software offerings, Alphabet also has the opportunity to integrate AI into consumer products like Google Home and Pixel phones to enhance user experiences, which offer the potential for a domino effect with higher word-of-mouth referrals leading to more sales.
4 Areas Investors Are Not Focused On
The headline divisions make up the bulk of Alphabet revenues but CEO Sundar Pichai also has growth levers in a vast numbers of other areas and sectors. For example, AI applications in healthcare through ventures like Verily and DeepMind focus on disease detection and new drug discovery.
And then there’s the opportunity to make a splash in retail and shopping experiences by enhancing consumer engagement through AI-driven recommendations and search capabilities.
Even in the cybersecurity realm, indirect financial benefits can flow through to Alphabet as trust and reliability go up, leading to greater adoption of its services.
Last but not least, Alphabet has an enormous opportunity to launch AI-as-a-service, featuring tools and solutions to businesses across various applications, including natural language processing and data analytics.
Put all those into the mix and the upside makes buying Alphabet stock akin to a call option with limited risk and a whole lot of potential.
Is Alphabet a Smart AI Stock to Buy?
With analysts assessing that Alphabet should rise to $155 per share in order to reach fair value, shareholders have a potential 13% gain on their hands before a plateau is reached in price.
Admittedly, Alphabet is trading at an elevated price-to-earnings multiple of 25x currently so a correction may come before a resumption of the bull trend, but for long-term holders, the reward to risk ratio is starting to look really good when AI optionality is factored in.
