Alphabet's AI Bets Look Safer Than Expected
Alphabet (GOOGL), the parent company of Google, is considered a relatively safe bet in the artificial intelligence space. Its diversified portfolio makes it less dependent on any single AI product or customer.
The company's custom chips, such as Tensor Processing Units (TPUs), give Alphabet an edge over its competitors like Amazon and Microsoft. TPUs allow Alphabet to design chips alongside its models, networking, and software, which can lower AI costs and ease dependence on expensive Nvidia hardware.
Alphabet spent $44.9 billion in the second quarter alone and raised its 2026 capex forecast to $195-205 billion. However, it also has a cash-rich business model with $242.5 billion in cash and marketable securities against $98.2 billion of long-term debt.
The company's core revenue streams are funding its next growth phase, including Google Services, Search, YouTube, and Cloud. Alphabet's normalized multiple still looks attractive, with a 22.36x forward earnings estimate for Fiscal 2027 and an implied 18% EPS growth in 2028.