Of all the “Magnificent Seven” stocks, none have even come close to the gains that Nvidia has posted. The chipmaker’s shares have skyrocketed 221% in just the last 12 months (as of Feb. 6). There has perhaps been no bigger beneficiary of the artificial intelligence (AI) boom.
It’s understandable if you’re worried that you missed the boat on Nvidia. But there’s still a reason to remain optimistic. Take a closer look at Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), which just might be the best AI stock to buy and hold.
Nvidia’s rise is justified
Providing the chips that power AI use cases has been a thriving business, propelling Nvidia’s growth. The company’s fiscal 2024 third-quarter sales of $18.1 billion were more than triple the year-ago period, demonstrating the strong demand the company is experiencing. Plus, the business is posting a surge in profits.
With the global AI market expected to expand nearly ninefold over the next seven years, Nvidia is staring at a massive opportunity to keep the growth going. This has supported investors’ extreme bullishness about Nvidia being a smart AI infrastructure play.
But because of this stock’s meteoric rise, things look to be on the expensive side of things right now. Shares trade at a price-to-earnings ratio of 89.7. That’s still a steep price to pay for prospective investors, regardless of the growth potential.
Alphabet isn’t new to AI
In the fourth quarter of 2023, Alphabet reported digital advertising revenue of $65.5 billion, which was up 11% year over year. But this figure disappointed Wall Street, sending shares lower after the announcement. And the stock now trades at a P/E multiple of 24.9. This is a good entry point for investors to own a leader in AI.
CEO Sundar Pichai said more than seven years ago that Alphabet would be “AI-first.” This was long before the introduction of ChatGPT in late 2022, which set off a race among tech companies to launch AI products and services.
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