The wave of artificial intelligence is sweeping the world, and investors are flocking to it. However, whether the market enthusiasm is over-hyped still needs to be carefully considered. This article will provide an in-depth analysis of technology giant Alphabet’s layout and development prospects in the field of artificial intelligence, and explore its stock investment value. Alphabet has demonstrated strong competitiveness in the field of generative AI with its strong technical strength and diversified product lines, and the rapid growth of its cloud computing business has also provided a solid foundation for the company's future development. Alphabet's valuation is relatively low compared to other AI companies, which presents investors with potential investment opportunities.
As the artificial intelligence (AI) craze continues to heat up, investor enthusiasm for the field seems to have reached new heights. However, questions remain about whether the market's enthusiasm for AI stocks is overhyped. Take Nvidia, for example. Its stock price has soared tenfold in just a few years, but this lofty valuation may lead to future market corrections.
Nonetheless, the generative AI market is still in its early stages of rapid growth. Some analysts predict that spending on generative AI will reach $356 billion by 2030, with an average annual growth rate of 46%. By comparison, spending this year is expected to be just $36 billion. Since Nvidia's valuation already reflects this growth, investors should probably look at other potential beneficiaries.
Among many technology companies, Google parent company Alphabet (NASDAQ: GOOGL) is particularly eye-catching. Since OpenAI launched ChatGPT at the end of 2022, Alphabet investors have worried about its future, causing its stock price to fall to its lowest price-to-earnings ratio (P/E) in a decade of about 15. However, Alphabet's stock price has rebounded over the past two years, with a cumulative return of 90%.
Through its various subsidiaries and research laboratories, Alphabet has successfully launched a number of new AI products, including the NotebookLM document summary tool, Google search AI summary function, and Google Lens, which can be searched by taking photos. These innovations show that Alphabet has not only made progress in the field of generative AI, but also achieved remarkable results in other technologies such as autonomous driving. Its Waymo has expanded operations in many cities in the United States and completed 100,000 rides per week. Services have grown tenfold every year.
In terms of profit model, Alphabet is relying on its cloud computing business Google Cloud to achieve profitability. Google Cloud uses Alphabet's AI technology, computing chips and data centers to sell related tools to third-party customers. In the most recent quarter, Google Cloud's revenue increased 35% year-on-year to $11.4 billion. The business is expected to reach $100 billion in annual revenue and 25% profit margins in the next few years, which will contribute $25 billion in operating income to the parent company.
Despite Alphabet's performance in AI, its stock valuation remains lower than many of its peers, with a current P/E ratio of 23, compared with Nvidia's 66 and Apple's 37. Given that generative AI revenue will grow rapidly over the next decade, Alphabet will undoubtedly occupy a significant position in this market, and investors can buy the stock today at a relatively low valuation.
Highlight:
It is expected that by 2030, the generative artificial intelligence market expenditure will reach 356 billion US dollars, with an average annual growth rate of 46%.
Alphabet is becoming a winner in the field of generative AI through multiple AI products and cloud computing business.
Despite Alphabet's outperformance, its P/E ratio is still lower than many of its peers, providing investors with a good buying opportunity.
All in all, although there are risks and uncertainties in the AI market, Alphabet has significant competitive advantages and long-term growth potential in the field of generative AI with its strong technical strength, diversified product lines, and relatively low valuation. It is worth Investors pay attention. However, you still need to be cautious when investing and make decisions based on your own risk tolerance.