We recently compiled a list of the 10 Best Cloud Computing Stocks to Buy Now. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against the other cloud computing stocks. You can also check out the 10 Best Artificial Intelligence Stocks to Buy Under $10 here.
Cloud computing has changed the way we access and manage computing resources. The industry is poised for significant growth in the coming years. Market estimates suggest a jump from a size of $0.68 trillion in 2024 to a projected $1.44 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 16.4%. This upward trend is expected to continue, with the market reaching a value of almost $2.5 trillion by 2032. These figures point towards a rising adoption and utilization of cloud solutions across various industries.
The growth in the industry is likely to be driven by a number of factors. One key factor is the growing recognition among large enterprises of the impact that cloud computing can have on their operations. In fact, an impressive 94% of companies across the globe have already adopted cloud computing solutions. This high rate of adoption is expected to have a remarkable economic impact, with forecasts showing that it could generate approximately $3 trillion in revenue by the year 2030.
Currently, North America and Europe are leading the way in cloud computing adoption, with Asia Pacific not far behind. North America holds the largest share of the global market at 41%. The region’s early adoption of technologies like artificial intelligence (AI) and machine learning (ML) has played a key role in driving its cloud market growth.
Even with stricter regulations around data privacy and security, the European markets are also displaying consistent growth in cloud adoption. Countries like Sweden, Finland, the Netherlands, and Denmark are leading the way in cloud adoption within specific industries. This suggests that European businesses are increasingly recognizing the value of cloud solutions while navigating a regulatory landscape that prioritizes data protection.
The Asia Pacific region is also currently experiencing a rise in cloud computing adoption. The market size rose to an estimated $32.5 billion in 2022 and is projected to be a significant contributor to the global cloud computing market in the coming years. This growth can be attributed to a large-scale shift towards digital business models across various industries in the region. The need for cost-effective solutions has fueled cloud adoption among small and medium businesses (SMBs). Approximately 78% of SMBs are currently using cloud services, with 39% of these businesses spending up to $600,000 per year on public cloud services.
Our Methodology
To shortlist the best cloud computing stocks to buy now, we relied on Insider Monkey’s extensive database of 920 hedge funds as of Q1 2024. We picked the cloud computing stocks with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 222
Global tech giant Alphabet Inc. (NASDAQ:GOOG) offers a wide range of products and platforms across various regions, including the United States, Europe, and Asia-Pacific. The company operates through three main segments one of which is Google Cloud. This segment caters to businesses, offering infrastructure, cybersecurity solutions, databases, analytics tools, and artificial intelligence (AI) services. It also includes Google Workspace, a suite of cloud-based communication and collaboration tools.
Alphabet Inc. (NASDAQ:GOOG) reported strong financial results for the first quarter of 2024, exceeding expectations. Revenue reached $80.54 billion, reflecting a significant 15% year-over-year increase. Profitability also showed marked improvement. Net income rose significantly to $23.66 billion compared to $15.05 billion in Q1 2023. Earnings per share followed the positive trend, reaching $1.89, up from $1.17 in the previous year.
Analysts are positive on Alphabet Inc. (NASDAQ:GOOG), assigning a “Strong Buy” rating based on 38 recommendations in the past 3 months. The average 12-month price target for Alphabet Inc. (NASDAQ:GOOG) stock sits at $198.92, suggesting a potential upside of 8.29% from the current price levels.
Here’s what Weitz Investment Management said about Alphabet Inc. (NASDAQ:GOOG) in its Q1 2024 investor letter:
“Mega-cap titans Meta Platforms, Alphabet Inc. (NASDAQ:GOOG) and Amazon generated outsized gains and were the Fund’s top relative contributors for the past 12 months. Following our valuation discipline, we continued to methodically rotate from more fully priced stocks to those trading at healthier discounts to our value estimates. We trimmed more tech-adjacent winners during the quarter, including Alphabet
Alphabet has been the most notable trim over the past two quarters. In effect, we removed the heavy overweight layer of the position size, which had been in the 6% to 8% range for most of the last five years. Part of the decision simply reflected valuation prudence after an exceptional period where the stock price ran well ahead of our estimate of business value growth. Some of it was a reality check that Google’s core search business may be less clearly unassailable than it appeared to be five to seven years ago. Our team also has adopted a healthy “prove it” approach to management/culture, capital allocation and future returns on a robust investment cycle. While Alphabet may no longer warrant standout overweight status, the stock remains one of the Fund’s largest holdings.”
Overall GOOG ranks 3rd on our list of the best cloud computing stocks to buy. You can visit 10 Best Cloud Computing Stocks to Buy Now to see the other cloud computing stocks that are on hedge funds’ radar. While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that 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 GOOG 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 is originally published at Insider Monkey.