Semiconductor stocks have continued to soar since ChatGPT was announced in late 2022. Since then, a number of new generative artificial intelligence (AI) applications have made state-of-the-art graphics processing units capable of processing accelerated applications a hot commodity.as Nvidia (NASDAQ:NVDA) is the leader in some parts of the chip market, and its sales and stock prices are skyrocketing.
After seeing Nvidia’s stock price rise 222% in the 12 months through Wednesday, some investors are understandably worried that the stock is getting too far ahead of itself.
Nvidia is scheduled to report its fourth quarter results on February 21st. During the third quarter fiscal period ended Oct. 29, total revenue increased 206% year-over-year.
Assuming growth continues at its current pace, a valuation of approximately 97 times earnings is not unreasonable. However, the semiconductor industry is known for its cyclical business cycle. Demand for chips that can power generative AI applications will eventually collapse. However, we don’t know when that crash will occur. He bought Nvidia at this inflated valuation and could incur big losses if the bottom drops next year.
For most people who missed the boat with Nvidia, getting on board involves more risk than they’re willing to accept. If you want to connect your portfolio to the leading companies of the AI revolution with significantly less risk, consider buying the following stocks. alphabet (NASDAQ:GOOG)(NASDAQ:Google) Now you need to hold onto it for the long term.
Alphabet’s AI capabilities are better than you think
The AI gold rush started about a year and a half ago when OpenAI launched ChatGPT. But by then, Alphabet had already been an AI-first company for several years. In a 2016 blog post, Alphabet CEO Sundar Pichai told everyone, “Over the next 10 years, we will move to an AI-first world, a world where computing is universally available.”
Without an army of engineers skilled in the field of machine learning, Google would not be able to recognize misspelled words in search queries or rank search results appropriately. According to Statcounter, Google has a 91.5% share of the global search market as AI works behind the scenes to provide better results. microsoftThe tech giant, now worth more than $3 trillion, launched Bing nearly 15 years ago, but still only has a 3.4% share of the global search market.
Google Maps has over 1 billion monthly users and millions of businesses actively use the platform to acquire new customers. Maps is also an AI-intensive application. AI wouldn’t be able to predict traffic or recommend improved routes without the contributions of some of the industry’s most valuable talent.
Why Alphabet is well-positioned for AI’s next chapter
In addition to its competitive search business, Alphabet is also a leading provider of cloud computing services. Late last year, the addition of Gemini further increased the value of its cloud services.
OpenAI was swept under the rug by Alphabet, which launched ChatGPT in late 2022. In a nutshell, Gemini uses a chatbot previously known as Bard to offer a similar generative AI experience to consumers. Gemini also offers his enterprise-scale Google Cloud customers the opportunity to build their own AI applications.
With several applications boasting more than 1 billion monthly active users, Google is able to provide enterprise-level cloud customers with access to large amounts of real-world data they can’t find anywhere else.
fair price
Google Cloud revenue grew 26% year-over-year in the third quarter. With a large addressable market and an advantage over competitors that don’t dominate the search and location data market, investors can reasonably expect the company’s cloud business to experience strong growth over the next decade. .
The majority of Alphabet’s revenue and profits still come from Google services. This sector is growing slower than the cloud business, but it is still far from stagnation. Google Services revenue increased 12.5% year-over-year in the fourth quarter. During the same period, operating profit in the services sector increased by 32%.
With an advantage over its competitors and two major business segments growing at double-digit rates, Alphabet should be valued at a high earnings multiple, but that’s not actually the case. You can buy the stock at approximately 21 times the forward P/E ratio.
There is no such thing as a risk-free growth stock. However, with reliable revenue from advertising and cloud services, buying Alphabet at a reasonable valuation gives you a great chance to gain long-term advantage. They have a firm footing in the rapidly evolving field of AI and have a chance to become top performers. Buying stocks now and holding them for the long term seems like a smart move.
Should you invest $1,000 in Alphabet right now?
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Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Cory Renauer has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
Did you miss Nvidia? 1 Artificial Intelligence (AI) Growth Stocks to Buy Now and Hold for 10+ Years was originally published by The Motley Fool.
