Picking just one artificial intelligence (AI) stock to include in your portfolio is nearly impossible. While few companies are fully focused on AI, many dabble in other areas as well as AI, so even having a balanced portfolio means owning multiple AI stocks.
But if I had to choose one, alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL).
Alphabet's AI ecosystem spans nearly every sector
You might find it interesting that I didn't choose NVIDIAthe king of AI hardware. Or maybe you expect me to pick it. Microsoft That's because the company has partnered with OpenAI, the company many consider to be at the top of the generative AI race.
But I think Alphabet represents a good compromise between these two spectrums.
First, Alphabet developed its generative AI models in-house, which is important because any model will eventually have problems. (Alphabet's Gemini has already had some problems and fixed them.) Other companies, such as Microsoft and apple Not developing its own generative AI models seems a bit lazy and could cause problems down the line. I think Alphabet's strategy gives it an edge over many of its competitors.
On the hardware side, Alphabet is a major purchaser of Nvidia's graphic processing units, but it is also developing its own chips specifically for training and running AI models. While Nvidia's GPUs are great for general-purpose AI training and workloads, clients can get better performance with hardware developed with training AI models in mind. This is where Alphabet's Google Cloud Tensor Processing Units (TPUs) come in. Because TPUs were created specifically to run AI workloads, they are more efficient and faster than Nvidia's GPUs at training AI models.
However, Nvidia GPUs remain popular because workloads need to be configured in a certain way to benefit from using TPUs (which is why Google Cloud has a lot of them). But as companies become more familiar with creating AI models, Google Cloud's TPUs could skyrocket in popularity, and because the hardware is only available to Google Cloud customers, it could give Alphabet even more exposure to AI.
Alphabet is also big on AI. For years, the company has used AI to understand website content, making Google search results more likely to give users what they're looking for. Additionally, the company has used AI to identify patterns and better target ads to its audience.
Finally, Alphabet has a lot of tooling for developers of AI models, which is very important because developers who use Alphabet's tools are likely to be locked into Alphabet's ecosystem, allowing Alphabet to get the most value out of them.
These are just a few of the reasons why I think Alphabet is a top AI stock to own, but the price you can buy at right now is also compelling.
Alphabet's stock price isn't that high
Unlike many of the other companies I've mentioned, Alphabet's stock isn't trading at an exorbitant premium, and as many technology companies are experiencing dramatic changes in revenue due to AI-related demand, let's use forward price-to-earnings (P/E) ratios to assess their relative valuations.
By using S&P 500 Here's a broad market index to compare these valuations to, giving us an idea of how expensive they are compared to the overall market: The S&P 500 is trading at 21.7 times forward earnings, giving Alphabet almost no premium compared to the other three companies.
While Nvidia is in a league of its own when it comes to growth, Alphabet's growth rate is on par with Microsoft's and much faster than Apple's, making it a much more attractive stock to own.
Alphabet is a great AI stock no matter how you value it, and a good portfolio would include many stocks, but if I had to pick just one, Alphabet would be at the top of my shopping list.
Should you invest $1,000 in Alphabet right now?
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of Motley Fool Stock Advisor The analyst team Top 10 Stocks Here are the stocks investors should buy right now… Alphabet isn't one of them. These 10 stocks have the potential to generate huge profits over the next few years.
Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That comes to $808,105.!*
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Keithen Drury is an investor in Alphabet. The Motley Fool invests in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
“If You Could Only Buy One Artificial Intelligence (AI) Stock, Buy This One” was originally published by The Motley Fool.
