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Prediction: This Will Be the Largest AI Stock in 2030
By Keithen Drury – Apr 6, 2023 at 10:00AM
KEY POINTS
Hardware and application companies are two main ways to invest in AI.
Alphabet gives investors exposure to nearly every facet of this burgeoning field.
The stock trades at a cheap valuation despite its encouraging prospects.
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NASDAQ: GOOGL
Alphabet
Alphabet Stock Quote
Market Cap
$1,341B
Today’s Change
(3.78%) $3.95
Current Price
$108.42
Price as of April 6, 2023, 4:00 p.m. ET
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There are many ways to invest in artificial intelligence, but few companies have offerings in every segment.
Artificial intelligence (AI) has captured the minds of many investors thanks to its massive addressable market. When the primary goal of a new technology is to automate processes, aid in decision making, or improve productivity, the potential uses are nearly endless. That’s exactly what AI aims to do, and investors are smart to look at investing in the space.
But which AI stock will be the largest by 2030? Let’s look at a few candidates, and you’ll find out which company I think could have a shot at the title.
Multiple companies could be considered AI investments
The total addressable market for AI is massive; by 2030, it’s expected to be worth nearly $2 trillion, according to Statista. That’s a massive pie, and multiple companies will be vying for these revenue streams.
You can invest in AI in two ways. First, you can invest in an application company like Palantir (NYSE: PLTR) or CrowdStrike (NASDAQ: CRWD) that’s using AI in its software to create a continuously learning product. Training those AI models takes a lot of computing power and data, so hardware companies like Nvidia (NASDAQ: NVDA) and data collection services like Snowflake (NYSE: SNOW) are also strong investment candidates.
However, there’s one company with its hands in nearly every corner of AI that I think will be the largest AI company by 2030. Alphabet (GOOG 3.76%) (GOOGL 3.78%) has invested in AI capabilities for years and has a massive workforce dedicated to proliferating AI.
Giving investors exposure to multiple AI fields
Starting with AI applications, Alphabet has multiple tools developers can use to build their AI solutions. For example, it has a machine learning toolkit for mobile developers, enabling them to program text recognition, language translation, and face detection that would be nearly impossible for them to do otherwise.
As mentioned above, training AI models requires a vast amount of data. If a developer does not have access to the exact data set they want, Alphabet’s vast library of data may be able to provide it. If Alphabet doesn’t have the right data, it also has a Google search engine specifically designed to locate other data sets.
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NASDAQ: GOOGL
Alphabet
Today’s Change
(3.78%) $3.95
Current Price
$108.42
YTD
1W
1M
3M
6M
1Y
5Y
PRICE
VS S&P
GOOGL
S&P
KEY DATA POINTS
Market Cap
$1,341B
Day’s Range
$104.33 – $109.17
52wk Range
$83.34 – $137.16
Volume
48,711,480
Avg Vol
41,343,445
Gross Margin
55.38%
Dividend Yield
N/A
Should you invest $1,000 in Alphabet right now?
Lastly, building computers to train AI models can be extremely expensive, and the computer becomes a sunk cost if the model doesn’t need to be continuously updated.
Another option is to outsource computing to Google Cloud, which provides the infrastructure and analytics developers need to build their AI models. This option has become popular as it gives developers access to computational power they wouldn’t get otherwise.
Alphabet has its hands all over the AI space, but it isn’t generating massive revenue from it — yet.
AI isn’t helping Alphabet’s financials currently
Currently, DeepMind (Alphabet’s AI laboratory) reports its revenue through the “other bets” segment, and that will be a line item to keep an eye on throughout 2023 and beyond. However, AI is also integrated into Google Services and Google Cloud.
But for the time being, Alphabet is still an advertising company. In Q4, advertising made up 78% of Alphabet’s total revenue. Advertising has always been a volatile industry as companies tend to cut spending when facing an economic downturn.
Therefore, Alphabet will likely see strong revenue growth when the economy recovers. And diversifying into the AI space should help Alphabet weather these storms, making it an even stronger company.
Yet even with its bright prospects and the temporary nature of its struggles, the market values Alphabet as if its future will be a flop and advertising revenue won’t return.
GOOGL PE Ratio Chart
GOOGL PE RATIO DATA BY YCHARTS
Twenty-three times earnings is a cheap multiple for a tech giant whose earnings are temporarily suppressed and that has another business developing in AI.
While Alphabet’s market value of $1.3 trillion gives it an advantage over nearly every other AI company, it’s safe to say it’s also one of the most committed to the technology. Alphabet is well-positioned to lead this emerging field, and I think investors should consider the stock for that reason.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, CrowdStrike, Nvidia, and Snowflake. The Motley Fool has positions in and recommends Alphabet, CrowdStrike, Nvidia, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.
