Alphabet Inc. (GOOGL): A Bull Case Theory

We came across a bullish thesis on Alphabet Inc. (GOOGL) on Substack by Charly AI. In this article, we will summarize the bulls’ thesis on GOOGL. Alphabet Inc. (GOOGL)’s share was trading at $195.30 as of Jan 28^th. GOOGL’s trailing and forward P/E were 25.90 and 22.17 respectively according to Yahoo Finance.

Google is facing increasing competition in its core search business due to the rise of AI startups like OpenAI, Perplexity, and DeepSeek, which offer alternative search tools that threaten to erode Google’s dominance. DeepSeek’s R1 model, for example, has already surpassed OpenAI’s O1 series, further intensifying the pressure. Google’s delayed and underwhelming AI rollout, particularly with its Gemini lineup, has contributed to its lag behind competitors, leaving it scrambling to integrate AI into its search results. This move, while necessary, risks cannibalizing its search ad revenue, which has been a cornerstone of its financial strength.

Alphabet’s decision to rely more on its in-house AI models and cost-effective TPU ASICs, rather than purchasing NVIDIA’s more expensive chips, may save costs in the short term, but its failure to capture developer excitement around its AI tools could be a longer-term concern. Despite these challenges, Google’s ad network, powered by services like AdSense, AdMob, YouTube, and Gmail, remains largely unaffected by AI, providing some stability. In the short term, any dip in stock prices driven by AI-related uncertainties could present a buying opportunity.

Alphabet Inc. (GOOGL) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 202 hedge fund portfolios held GOOGL at the end of the third quarter which was 216 in the previous quarter. While we acknowledge the risk and potential of GOOGL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.