The Artificial Intelligence (AI) Stock I'd Buy With $1,000 Before the Market Bounces Back
Key Points
Alphabet is firing on all cylinders with excellent performance across its various businesses.
Analysts estimate that revenue growth will accelerate next year.
Alphabet's entrenched businesses will help it profit from its AI investments.
- 10 stocks we like better than Alphabet ›
Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), Google's parent company, was arguably the market's hottest artificial intelligence (AI) stock up until the Nasdaq Composite Index's correction last month. The sell-off knocked the tech giant off a monster rally, where it surged by more than 100% over the past year.
Shares currently sit about 13% off their high. If you have $1,000 or some other amount to invest, here's why you may want to scoop up Alphabet stock before the tech-heavy market index rebounds.
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Alphabet's hot momentum will likely continue
The company's fourth-quarter 2025 earnings report made one thing very clear: AI is driving strong performance throughout the company.
Revenue from Google Search and other ads, its legacy business that investors once feared would crumble due to AI, soared 17% year over year. AI overviews within Search have been a game changer. Google Cloud continued to accelerate on AI-driven demand, with revenue up by 48% and operating income up more than 153% in the quarter.
Although the fight between AI companies OpenAI and Anthropic seems to dominate the news headlines, Alphabet is right there in the mix, with its vast user base. The Google Gemini AI app now has more than 750 million monthly active users, and Google has more than 325 million paid subscribers across Google One and YouTube.
Don't forget about Waymo, Google's autonomous ride-hailing service, which continues to expand and has raised external funding to help accelerate that expansion.
In all, Alphabet has a ton of business momentum right now. Total revenue grew by 15% in 2025, and analysts expect growth to accelerate to almost 17% this year. It's impressive for a company now generating $403 billion in annual revenue. Oh yeah, Alphabet hasn't even begun powering Apple's upcoming revamped Siri AI assistant with its Gemini AI yet.
Why investors should buy the dip, not fear it
Is Alphabet a bargain after this pullback? No. But its valuation seems very fair, at worst. Alphabet stock trades at 27 times its trailing 12-month earnings, and analysts expect earnings to grow by an average of 15% annually over the long term. That's a PEG ratio of 1.8. Again, not cheap, but it indicates a very reasonable P/E ratio for the growth you're expecting from one of the best AI stocks money can buy.
If Alphabet continues to dip amid broader market pressure, the stock will become an even more compelling buy. Admittedly, Alphabet's AI investments are expensive. Management is pumping $175 billion to $185 billion into AI and data centers this year alone. But remember, Alphabet is funding most of this with profits from its existing ad and cloud businesses.
Alphabet is also weaving AI into existing products and services that people are already happily using, and some are even paying for. That needs to continue, but Alphabet is as well-positioned to realize a strong return on AI investments as any other hyperscaler.
Should you buy stock in Alphabet right now?
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Justin Pope has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple and is short shares of Apple. The Motley Fool has a disclosure policy.
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