Alphabet's recurring revenue businesses will boost its stock over the next decade.
Why not Nvidia or Micron?
This section critiques the idea of Nvidia and Micron Technology being the ultimate winners of the AI arms race. For Nvidia, the current extreme demand for GPUs and computing products is noted to be unsustainable, with eventual saturation of data center build-outs leading to potential price and margin compression. For Micron, which produces memory chips, the current high prices due to tight supply are expected to reverse as increased production capacity leads to greater supply and potentially lower prices, presenting a challenge for sustained long-term performance.
Alphabet has a rock-solid approach to AI
This section argues for Alphabet as the potential long-term winner in the AI race, emphasizing its robust, multi-faceted strategy. Alphabet is actively developing its own large language models and integrating them into its product ecosystem, though this is currently a loss-making venture. More significantly, Google Cloud, Alphabet's cloud computing arm, is generating substantial revenue and high operating margins (36%) by providing essential AI computing capacity to various clients, including competitors like Anthropic. This recurring revenue model from providing foundational AI infrastructure, coupled with an impressive 82% growth rate in Google Cloud and substantial capital expenditures (projected $195-$205 billion for 2026) that are yielding strong returns, positions Alphabet for sustained long-term success in the AI industry.
