"Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google has billions of people worldwide who use its services like Search, Gmail, and YouTube every day. It generates loads of cash from advertising revenue that is fueling investments in artificial intelligence (AI). You would think a business in Google's competitive position would trade at more than 23 times next year's expected earnings. This is a lower price-to-earnings multiple than the S&P 500, which makes Alphabet an incredible value right now."
"Its conservative valuation reflects concerns about increasing competition. More people are using AI models like OpenAI's ChatGPT, which some investors believe could be a substitute for traditional search engines like Google's. It appears OpenAI is taking aim at Google after it recently partnered with Walmart in its effort to turn ChatGPT into an intelligent shopping assistant. But this risk might be overblown. Alphabet reported that people are searching more often since it rolled out AI Overviews last year."
The tech-focused Nasdaq Composite is up 20.4% year-to-date, outperforming other major indexes. Leading technology companies still offer attractive valuations for long-term investors. Alphabet's Google serves billions via Search, Gmail, and YouTube and generates substantial advertising cash that funds AI investments. Alphabet trades at about 23 times next year's expected earnings, below the S&P 500 multiple, reflecting perceived risks from AI competitors. Increased use of AI features like AI Overviews has raised search frequency and strengthened Search advertising revenue while AI also boosts Google Cloud performance. Dell is experiencing exploding demand for AI servers while trading at a modest price-to-earnings multiple.
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