Alphabet Just Proved Why It’s a Top Artificial Intelligence (AI) Stock Once Again
Keithen Drury, The Motley Fool
Fri, July 24, 2026 at 11:23 PM GMT+5:30
3 min read
- GOOG
+0.35% - NVDA
-1.78%
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is one of the largest companies in the world, sitting in third place right now. It’s widely considered an artificial intelligence (AI) leader, something that wasn’t true just a year and a half ago. It just had another phenomenal announcement and showcased once again why it’s a strong candidate for best AI stock to own
Furthermore, Alphabet’s stock sank following this announcement, underscoring the market’s short-sightedness. The market wants profits now with no spending, and those two things are incompatible. This unrealistic expectation makes now a great time to buy Alphabet shares if you’ve missed out, and the discount may not last for long
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Google Cloud continues to amaze
Alphabet is a conglomerate based around the Google family of products. That means that it’s an advertising business, but is quickly trying to pivot to become an AI-first one. Despite its Google Search business being a pretty mature business unit, it saw revenue growth of 17% year over year in Q2. That makes it the strongest-performing Google Platform — quite the feat for its size. Part of Google’s revenue comes from AI-driven search results, but there is a more focused AI business unit: Google Cloud.
Google Cloud is where investors are going to see the most immediate benefit of AI revenue, as there are several clients running AI workloads on Google Cloud’s servers. The computing capacity is rented out to these clients, creating a continuous revenue flow for Alphabet. This division posted an incredible quarter during Q2, with revenue rising 82% year over year. That’s a significant acceleration over Q1’s 63% growth
As another boost, Google Cloud’s operating margin rose from 32.9% in Q1 to 35.6% in Q2. There are major improvements going on here, and with a $514 billion backlog to churn through (Google Cloud generated $24.8 billion in revenue during Q2), there is a ton of growth ahead for the foreseeable future
However, Alphabet must spend money to continue growing Google Cloud, which caused it to increase its capital expenditure guidance to $195 billion to $205 billion for the year. That sank the stock, as the market was already concerned that Alphabet was spending too much. I think this is just short-term thinking by the market, as Alphabet’s spending strategy is clearly paying off
