Now that it is reasserting its dominance in AI, Alphabet (NASDAQ:GOOG; NASDAQ:GOOGL) stock looks like a definite buy. Alphabet stock is currently at an all-time high, up nearly 30% so far this year. GOOG stock has risen 14% in the last month because of new AI technologies and regaining its position as a leader in the global AI race.
The increase in the share price has pushed Alphabet’s market capitalization above $2 trillion for the very first time. There is likely a lot more room to run in Alphabet stock as the company benefits from a host of tail winds beyond AI that include a rebound in online advertising, growth in cloud computing, and strong sales of its Pixel smartphones.
AI Dominance
Alphabet just wrapped its annual I/O developer conference, where it unveiled a host of new AI products that impressed everyone in attendance.
Leadership showcased how it is integrating AI into online search through Google, which is used by billions of people around the world each day. Executives also showcased a new version of the Android operating system and updated the company’s most advanced AI technology, Gemini.
The centerpiece of the presentation was Project Astra, a new AI model that can talk to users about anything captured on their smartphone camera in real time and categorize online search results. The company also unveiled a Gemini 1.5 AI model called Flash that is faster and cheaper to run than previous versions of the technology.
Analysts agreed that the AI products from Alphabet were as strong or stronger than the latest tech introduced by leading competitor OpenAI, which unveiled its newest AI model, GPT-4o, the day before Alphabet’s I/O developer conference.
Other Strengths
The enthusiastic reception to Alphabet’s latest AI innovations is a welcome reversal for the company. Analysts and investors had spent much of the past year criticizing Alphabet for trailing in the AI race and making missteps with the products it introduced. While it’s nice to see Alphabet leading in AI, it is not the company’s only strength, or the only reason to buy the stock.
At the end of April, Alphabet declared its first dividend payment alongside blowout first-quarter earnings. The technology giant said that it will pay a cash dividend of 20 cents per share starting on June 17.
Besides the quarterly dividend, Alphabet also announced a new $70 billion stock buyback program. The company had $108 billion of cash on hand at the end of this year’s first quarter.
Alphabet announced the dividend and share repurchases along with financial results that showed gathering strengths in several areas. Highlights of the earnings print included YouTube advertising revenue of $8.09 billion, which topped forecasts of $7.72 billion.
Operating income in Google’s cloud business more than quadrupled to $900 million, showing that the company is now generating substantial profits in that business segment.
Management said that online advertising is accelerating after a difficult 2022 and 2023 when rising interest rates forced other companies to cutback on their ad spending.
Buy Alphabet Stock
There are many reasons to be bullish on Alphabet and its stock right now. The company is experiencing rapid growth opportunities with AI, online advertising, and cloud computing. Add in a new dividend payment and huge stock buyback program, and it becomes an obvious choice. Alphabet stock is a buy.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
