With the recent decline in artificial intelligence (AI) stocks, it’s starting to look like the excitement behind the technology is beginning to fade.
This is bad news for smaller startups in the region that are still dependent on large amounts of investor dollars. However, this is great news for investors and the big companies involved aye.
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Investors benefit when AI stocks fall to more reasonable levels. And for larger companies, like alphabet (NASDAQ:GOOG)(NASDAQ:GOOGLE)Anything that pushes out smaller competitors can be a good thing.
Alphabet is a giant company and its stock has declined in the last month. I think this is the only AI stock “the magnificent Seven” It is worth buying now.
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Alphabet is Google’s parent company, after all, and I’m willing to bet you’ve interacted with that website recently.
It has also been the most successful of the Magnificent Seven in developing its own AI technology. Google Gemini continues to gain market share in the enterprise Large Language Model (LLM) market by 2023.
In 2023, OpenAI, the company behind ChatGPT, had 50% share of that market. Today, its share has fallen to an estimated 27%, while Google’s share has increased from 7% to 21% in the same time frame. And if last year’s trend continues, Google is set to overtake ChatGPT this year.
Meanwhile, Alphabet’s Magnificent Seven colleagues meta platform Its share of the enterprise LLM market is set to fall from 16% in 2023 to 8% by the end of 2025. What’s more, Anthropic, the current market leader in the enterprise LLM space, has an estimated 40% market share, and will expand its use of Alphabet’s hardware going forward.
I would also note that another Magnificent Seven colleague, Applepartnered with Alphabet earlier this year to use Google Gemini’s models to develop its own AI products.
So, Alphabet is already outpacing one of its peers in AI software and another one of the Magnificent Seven relies on their software for its AI. Now, how is it behaving with others.
Alphabet’s Tensor Processing Unit (TPU), co-developed with broadcom, The Magnificent Seven represents a serious competitor to its peers NVIDIAThe graphics processing unit (GPU).
Note that all other Magnificent Seven stock use Nvidia hardware to run their AI to some degree Amazon And MicrosoftBoth of which extensively use Nvidia GPUs.
While they have stuck to purchasing all of their hardware from Nvidia, Alphabet is moving toward using their own hardware, and some other AI companies have also started using TPUs. Anthropic plans to spend tens of billions of dollars this year to add 1 gigawatt of TPU chips to its computational capacity.
So, with the exception of Tesla And NetflixAlphabet either has a competitor for every Magnificent Seven company’s AI product (be it hardware or software), or the company is using Google AI for its own products, like Apple does.
Google has basically established itself as the kingpin of the AI industry. And unlike AI start-ups like Anthropic or OpenAI, it has many other revenue streams besides AI, and it’s been a long time since Alphabet relied solely on investor dollars, so a drop in its stock price doesn’t hurt the company.
For 2025, Alphabet’s revenue is projected to increase 15% compared to 2024 to exceed $400 billion for the first time. The company saw its earnings per share (EPS) grow 34% in the same time frame. Alphabet’s net profit margin is also 32.8%, and its debt-to-equity ratio of 0.14 is very good.
All of this makes Alphabet a standout stock among the Magnificent Seven as far as AI is concerned.
Consider this before buying stock in Alphabet:
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james hires The positions are in alphabetical order. The Motley Fool has positions in Alphabet, Amazon, Apple, Meta Platform, Microsoft, Netflix, Nvidia, and Tesla and is short shares of Apple. The Motley Fool recommends Broadcom. The Motley Fool has one Disclosure Policy.
