Key Points
This company is arguably the most dominant internet enterprise of the past couple of decades.
The AI boom continues full steam ahead, and this business is positioned well, since it has a presence in multiple areas.
Investors are concerned about the right things, like regulatory pressures, but the stock is still a smart buy.
Investing success comes from finding winners and letting them run. Compounding can take over a portfolio, and investors benefit from satisfactory long-term returns. Building a diversified portfolio can be helpful as well, especially since it can make the journey a lot smoother.
This doesn't mean that investors can't find individual businesses that might catch their attention at any given point in time. This is how I view things today. If I could only buy and hold a single stock, this would be it.
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This business has been a dominant force in the internet age
Looking back at the past 30 years paints a clear picture of how the internet fundamentally changed our economy. Being able to easily access information or communicate with anyone in the world has created new ways of doing things, spawned new ideas, and of course, created new companies. Perhaps no business tops Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) in this regard.
Alphabet has been a dominant force in the internet age. And today, it's a $3 trillion behemoth that has 15 products and services that are each regularly used by at least 500 million people. This demonstrates unbelievable adoption and reach.
The company is almost impossible to disrupt these days. That's because it benefits from an incredibly powerful network effect, which makes its products and services better over time. Its ability to collect and utilize data is also hard to replicate. And the Alphabet and Google brands possess enormous value.
Being a leader in artificial intelligence is a natural progression
About a decade ago, CEO Sundar Pichai (who was the CEO of Google back then) revealed that Alphabet was shifting from a mobile-first focus to an artificial intelligence (AI)-first focus. Even before this public recognition that AI technology was going to be the future, Alphabet was well ahead of the curve. Google Search was starting to leverage machine learning capabilities all the way back in 2001.
These days, Alphabet is no doubt a leader when it comes to AI. It has a presence in seemingly every facet of the industry. This includes research, cloud computing, chip development, and large language models.
It's hard to compete with Alphabet, which has deep pockets to push forward aggressively. It spent $22.5 billion in capital expenditures in Q2 (ended June 30). For nearly every other company, this kind of spending wouldn't be possible. Alphabet is a different beast, as it raked in $62.7 billion in net income through the first six months of 2025. And it operates with a pristine balance sheet that gives it tremendous financial flexibility.
In essence, AI appears to be enhancing Alphabet's existing business. The technology is helping this company better serve its cloud customers and advertising customers. And AI is helping Alphabet improve the capabilities of its various user-facing products and services, such as Search, Maps, and YouTube. At the end of the day, it seems this will only strengthen the company's already-powerful competitive position.
It's hard to believe that the stock is trading at this valuation
It's not surprising that Alphabet has been a winning investment. In the past decade, the share price has risen by 619% (as of Oct. 14), increasing an investor's starting capital sevenfold. While returns going forward will likely come down, the future is still bright.
Alphabet presents investors with a favorable setup right now. The stock can be purchased at a price-to-earnings ratio of 26.1. This is just slightly above the S&P 500's valuation.
The market might still be concerned about the impact that chatbots, particularly OpenAI's ChatGPT, can have on users' search behavior in the years ahead. Google Search grew revenue by double-digit percentages in the second quarter, so nothing alarming is happening yet. What's more, investors could be hesitant since Alphabet seems to always be in the regulatory crosshairs.
These are trends to watch. However, it doesn't take away from the fact that Alphabet remains a top stock to buy.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
