Alphabet’s stock has been making a nice recovery since its crash post earnings…
While this is certainly something that shorter-term speculators should pay attention to, it’s ultimately just noise as far as the long-term viability of the business is concerned.
Alphabet hasn’t received the attention that others like Microsoft and Nvidia have gotten…
With that said, there’s a lot to love about the company moving forward!
Here why:
The Dominant Player in the Search Market
While investors were focused on Alphabet’s cloud business performance during their last earnings call, the reality is that it’s only a small fraction of their business…
The company’s main moneymaker is search advertising.
Alphabet controls about 92% of the market share in this domain if we account for all of their platforms including Google and YouTube.
It’s safe to say that they are the king of search!
Some investors are worried that AI threatens Alphabet’s main revenue source…..
They believe that chatbots will replace Google search as the main way in which folks access information.
While this is certainly a possibility, I think that it’s more likely for AI tools to get integrated into the existing search functionality rather than replacing it completely!
With this in mind…
Alphabet is Well Positioned to Succeed in AI
It’s very easy to get caught up in the headlines of Microsoft’s success with AI.
While it’s certainly a good start, the race is far from over!
It would be the equivalent of trying to predict who will win the 200-meter race based on the first 5 meters.
I’m sure many folks had Yahoo as the clear winner of the search race back in the early 2000s.
Look how that turned out…
As far as generative AI is concerned, Alphabet has many aspects going in its favor.
For one thing, the company has over $119 billion of cash on hand with a relatively low amount of debt…
This means that they have plenty of capital to put into generative AI-related investments.
Then there’s the concept of search itself…
It is likely that the winner in this race won’t be related to who has the best tech, but rather, who has the platform to market its AI tools.
It’s not hard to see why Alphabet has a big advantage here.
Google and YouTube are household names that most of the world is accustomed to using.
It wouldn’t be very difficult for the company to slip in some AI-related tools to their existing user base.
That’s all for now!
Until Next Time,
-Damian