Alphabet Could Simply Be the Best Tech Stock to Own — and It’s Still Cheap

By Chris MacDonald Published Mar 6, 9:24AM EST

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Alphabet (GOOG) revenue topped $400B, operating earnings up 29%, margin near 25% with ~$100B operating profit, Waymo raised $16B, took $2.1B Q4 charge, Gemini at 750M monthly users, multibillion-dollar deal with Apple (AAPL). Berkshire Hathaway (BRK-B) added a position.
Alphabet’s AI initiatives, including Gemini’s growth to 750M users and Google Cloud expansion, drive growth expectations while the company maintains 29% operating earnings growth and strong fundamentals.

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Alphabet Could Simply Be the Best Tech Stock to Own — and It’s Still Cheap — © JHVEPhoto / iStock Editorial via Getty Images

Technology juggernaut Alphabet (NASDAQ:GOOG | GOOG Price Prediction) continues to be a top pick of mine, Wall Street analysts, and most investors in the market. Indeed, the company’s performance of late is suggestive of strong momentum, and now the question is whether this momentum will continue.

Personally, I think the answer to this question is yes. Alphabet remains the world’s dominant digital advertising powerhouse, with a sprawling empire that includes the likes of Google Search, YouTube, and an absolutely giant (and fast-growing) cloud business that spews off an incredible amount of cash flow for investors.

Here’s why I think Alphabet still looks like the best tech stock to own right now.

If AI Is As Big As Folks Think, This Is a Stock to Own

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Alphabet’s status as a leader in the world of cloud computing and search is well known. Indeed, this company produces some of the most incredible results each and every quarter, particularly for a company of its size.

That said, there’s a specific AI angle which has reinvigorated many investor’s growth outlooks for the mega-cap tech giant. Indeed, I’d suggest that AI initiatives are the secret sauce turning this into a must-own stock.

Notably, Google Cloud is exploding thanks to Gemini, which now boasts more than 750 million monthly users (up from 400 million in nine months). This is a business segment I’d expect to continue to power enterprise AI demand for the foreseeable future, and should be a major growth engine for the company over the long-term. Additionally, Waymo just raised another $16 billion, scaling autonomous rides that could disrupt mobility forever, even after a $2.1 billion Q4 charge.

When investors add in DeepMind’s breakthroughs and a fresh multibillion-dollar deal to supercharge Apple’s Siri with Gemini, it’s clear to see that Alphabet’s already-impressive ecosystem moat is widening. Given the fact that annual revenue just topped $400 billion for the first time, I think the company’s AI investments analysts suggest could drive sustained double-digit growth are worth considering.

Don’t Forget About Alphabet’s Rock-Solid Fundamentals

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Stock chart with robot in foreground

These key growth catalysts are great. But as we’ve seen with many other AI-linked companies, until there’s revenue growth and profitability stemming from these investments, some market participants may choose to look to other companies in the intermediate term.

However, Alphabet’s recent operating earnings have highlighted the company’s underlying strength, with this number increasing nearly 29% on a year-over-year basis this past quarter. With the company now bringing in an overall operating margin close to 25% (nearly $100 billion in operating profit this past year), there’s certainly plenty to like about the company’s underlying strength. Its balance sheet is a thing of beauty, and that’s not just me saying that.

One of the final moves made by Berkshire Hathaway (NYSE:BRK-B) CEO Warren Buffett (or his team, who really knows) was to add a significant Alphabet position to the portfolio. I think that was a smart move, and it was one that actually caught me by surprise. Not because Alphabet isn’t a great company – it is. But because Buffett and his team have largely steered clear of tech investments, so this one really stood out.

With that kind of stamp of approval, I think the fundamental picture underpinning Alphabet is about as strong as any tech company in the market. It’s hard to disagree with the Oracle of Omaha.

About the Author Chris MacDonald →

Chris MacDonald is a 24/7 Wall St. contributor and long-time contributor to other notable finance publications, including The Motley Fool and InvestorPlace. With an MBA in Finance, and more than a decade of experience in venture capital and the corporate finance world, Chris brings a long-term perspective to his analysis of equities and alternative assets.

His love of investing and focus on finding quality undervalued stocks is complemented by recent research into alternative assets as well. He takes a long-term approach to analyzing companies and cryptos, with a focus on directing the reader to the most sustainable and important catalysts for each respective potential investment.