Got $5,000? 1 Artificial Intelligence (AI) Stock to Buy and Hold for the Long Term

If there was only one artificial intelligence (AI) stock I could buy and hold for the long term it would be Alphabet (GOOGL 0.44%) (GOOG 0.48%). Best of all, the stock is on sale, having pulled back from its highs, and now trades at a forward price-to-earnings (P/E) ratio of just 24 times this year’s analyst estimates and 20.5 times the 2027 consensus.

With $5,000, you can buy around 18 shares of one of the companies best positioned for the AI age moving forward.

Image source: The Motley Fool.

The AI leader

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NASDAQ: GOOGL

Alphabet

Today’s Change

(-0.44%) $-1.21

Current Price

$273.13

Key Data Points

Market Cap

$3.3T

Day’s Range

$273.08 - $277.03

52wk Range

$140.53 - $349.00

Volume

825K

Avg Vol

33M

Gross Margin

59.68%

Dividend Yield

0.31%

Alphabet is best known for its Google search engine, which owns an astonishing 90% market share. The company has created a wide moat around this business, not just through its technology, but also the powerful distribution network surrounding it.

The company also owns the world’s most-used web browser in Chrome and the top smartphone operating system in Android. Each commands a nearly 70% market share. It also has a search revenue-sharing deal with Apple to be the default search engine on its devices. This essentially makes Google search the de facto gateway to the internet.

The advent of AI chatbots added new competition to the world of search-discovery, but Alphabet was able to quickly develop its own world-class AI model with Gemini. Its standalone AI app has been steadily taking share away from ChatGPT in the consumer space, and OpenAI recently has made the decision to de-emphasize the consumer market. The AI model maker has had trouble monetizing this side of its business, and Alphabet’s ability to embed Gemini throughout Google search and other products, together with its huge ad network, has just given it a big edge that is tough to overcome in this area.

At the same time, Alphabet also uses its own custom AI chips, called tensor processing units (TPUs), to train Gemini and run inference. These chips were developed more than a decade ago, and Alphabet has optimized its entire hardware and software stack around them. This gives Alphabet a big structural cost advantage versus competitors, and ultimately creates a powerful flywheel effect.

While the market may not like it, Alphabet is smartly pushing this edge by spending big on AI infrastructure this year, which it should, given its cost advantage. That’s the smart thing to do. The company has even recently revealed the creation of an AI memory compression algorithm that can meaningfully reduce key-value (KV) cache memory needs, potentially giving it another cost advantage.

Given the advantages it has created for itself and the huge opportunity it has both with search-AI discovery and cloud computing, Alphabet is my favorite AI stock to own right now.