After a tumultuous start to the year, driven by heightened macro fears, investor sentiment has experienced a positive resurgence. Trade worries are starting to subside, and the major indices are trading near their record highs.
This setup could make it difficult for investors to find great deals. However, there's an opportunity hiding in plain sight. If you're ready to invest $2,000, this leading tech stock could be a bargain buy for 2025 and beyond.
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One of the world's most valuable companies
As of June 12, Alphabet (GOOGL 0.57%) (GOOG 0.20%) carried a market cap of more than $2.1 trillion, making it the fifth most valuable enterprise in the world. That huge number has been achieved thanks to a stock that has skyrocketed 1,340% in the past two decades.
With a market cap of this size, Alphabet has clearly done some things right on its journey to internet dominance. The company possesses powerful competitive advantages that make it almost impossible to disrupt.
First, Alphabet has impressive network effects. Google Search, the company's crown jewel that raked in $50.7 billion in revenue in the first quarter, gets better over time. As more users search for information, the algorithm improves, which refines the user experience. This supports greater usage.
YouTube also benefits from a network effect. As more people go on the platform to watch videos, it incentivizes creators to make more content. In turn, this leads to a bigger selection for viewers.
There are intangible assets to keep in mind, too. Alphabet has unrivaled technological expertise and know-how. Its success helps it attract the best talent in the world. Plus, having billions of users allows the business to collect vast amounts of data that help it improve continuously. Competitors can't copy this.
Well-positioned for an AI future
Alphabet's success was driven by the rise of the internet, as well as the massive amounts of data and information that are constantly being created in the world. Looking ahead, it's clear that artificial intelligence (AI) will have a profound effect. The business is positioning itself accordingly.
This means investing heavily to be a leader in AI. After spending $53 billion on capital expenditures in 2024, Alphabet plans to spend $75 billion this year. These cash outlays will go toward expanding technical infrastructure, like servers and data centers.
Alphabet's Google Cloud Platform (GCP) is a major player in the AI race. The world's third-largest cloud service provider, behind Amazon Web Services and Microsoft Azure, offers a wide range of tools to help customers build AI applications.
To illustrate just how valuable GCP is becoming, it was just announced that OpenAI, the creator of the incredibly popular ChatGPT, will use Alphabet's cloud services for added computing capacity. This is a huge win for Alphabet.
Besides winning a key partnership, the business is working tirelessly on boosting its AI offerings. The technology is already integrated across various products and services. However, Alphabet is looking to the future. At its recent Google I/O developer conference, the company introduced 100 new updates, basically all relating to AI innovations for users and developers.
NASDAQ: GOOGL
Key Data Points
Trading at a bargain valuation
As of June 12, shares of Alphabet trade 15% below their peak. The price-to-earnings ratio of 19.6 is the cheapest valuation of any stock in the "Magnificent Seven." Even better, Alphabet is currently cheaper than the S&P 500 index.
It's not every day that investors are presented with the chance to buy one of the world's truly elite businesses at a bargain price. It's best not to overthink the situation. Investing $2,000 in Alphabet stock is a smart move.
