This week is the over-the-top CES conference. And it looks like Alphabet Inc (NASDAQ:GOOGL) is sparing no expense to make a big splash. According to a post in Techcrunch: “The company’s presence is impossible to miss as you drive down Paradise Road toward the Las Vegas Convention Center.” OK then, so what can this mean for GOOGL stock?
Well, a conference usually should not matter much. But when GOOGL goes big one, it’s usually because there are some important announcements brewing. As for CES, it seems like AI (Artificial Intelligence) will take the spotlight.
If so, this should be good news for Google stock. Let’s face it, Wall Street has been focused on the AI opportunity, as seen with the blistering returns of companies like NVIDIA Corporation (NASDAQ:NVDA).
For Google then, it seems like a pretty good bet that it will highlight its Home offerings, which is the company’s answer to Amazon.com, Inc.’s (NASDAQ:AMZN) Echo. Keep in mind that recently the company posted a blog that highlighted the tremendous success of Google Home. Since October, Google has sold an average of one smart speaker every second or roughly 6.73 million!
Google Home is part of a rapidly growing ecosystem, which is creating powerful network effects, all of which should add fuel to GOOGL stock. For example, the Google Assistant, which is the AI system to handle voice commands, is on over 400 million devices and available in eight languages. The technology is compatible with more than 1,500 smart home devices across over 225 brands.
Usage is certainly key (which is up 9X during the holiday season). It means that Google’s AI platform is getting smarter and smarter.
GOOGL Stock and AI
Now it can be tough to gauge the impact of AI on Google stock. After all, the company is probably generating a loss on its speaker sales because of the rock-bottom price points. But the strategy is to quickly build a user base to lock-in customers. The fact that Apple Inc.(NASDAQ:AAPL) delayed its own smart home appliance has certainly made a big opening for GOOGL.
Yet the power of AI is still likely to have an all-pervasive impact on the company, which should help lift the growth rate. Over the years, GOOGL has ramped its R&D efforts in cutting-edge areas like machine learning, big data, voice/visual recognition and analytics. But this has not just involved software systems but also complex hardware, such as servers and chips.
What’s more, GOOGL has been able to leverage these technologies with its large consumer properties like Gmail, YouTube, Maps and Photos. The result is that the products have become more useful and personalized, which has led to improved monetization.
GOOGL also developed a widely popular AI open source platform, called TensorFlow, which is becoming a standard. Note that the technology was recently used with smartphones to detect disease in cassava plants.
According to CEO Sundar Pichai: “Even though we are in the early days of AI, we are already rethinking how to build products around machine learning. It’s a new paradigm compared to mobile-first software, and I’m thrilled how Google is leading the way.”
Bottom Line On GOOGL Stock
I’ve been a bull on GOOGL stock for some time. The fact is that the company is positioned to capitalize on some of the biggest megatrends in technology, such as video, the cloud, digital advertising, AR (Augmented Reality) and yes, AI.
And the valuation on GOOGL stock is also reasonable, with the forward price-to-earnings ratio at 26.6 times earnings. For the most part, the shares represent a pretty good way for investors to get exposure to the hottest parts of the tech world.
Tom Taulli is the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.