"The investment thesis for Alphabet centers on its strong presence in digital advertising and cloud computing. As the largest adtech company and third-largest public cloud, Alphabet is primed for strong growth, especially because expertise in artificial intelligence (AI) will likely reinforce its competitive edge in those markets."
"Applications like ChatGPT have made it abundantly clear that generative AI will forever alter internet search, but Alphabet's Google Search has adapted with AI Mode and AI Overviews, features built on its proprietary Gemini models. CEO Sundar Pichai says those features are 'driving greater usage.'"
"While Google Cloud still trails Amazon Web Services and Microsoft Azure, the company has steadily gained market share in recent years due in large part to demand for its Gemini models and custom AI accelerators called Tensor Processing Units (TPUs). In fact, Google Cloud revenue growth has accelerated in three consecutive quarters."
Jim Cramer, former hedge fund manager with a 24% annual return track record, recently recommended buying Alphabet at $344 and Amazon at $239 per share. Both stocks have declined since his recommendations, but Wall Street analysts largely agree they are undervalued. Alphabet's median analyst target is $385, implying 29% upside from $299, while Amazon's median target is $285, implying 31% upside from $217. Alphabet's investment case rests on its dominance in digital advertising and cloud computing, strengthened by AI capabilities including Google Search's AI Mode and AI Overviews powered by Gemini models. Google Cloud has gained market share through demand for Gemini and custom Tensor Processing Units, with revenue growth accelerating for three consecutive quarters.
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