Alphabet: The Magnificent Seven Stock for 2024, Beating Nvidia

13 January, 2024 | 3 Min Read

tickers: NVDA

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ticker	polarity	why?
NVDA	positively	The article mentions that Nvidia is a strong player in the market, but its stock has become overvalued, suggesting that investors looking for growth at a reasonable price may find a better investment option, such as Alphabet. Therefore, it can be inferred that Nvidia may be negatively affected as investors shift their focus to other companies like Alphabet.

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summary

Alphabet Primed for Phenomenal 2024

Alphabet, the parent company of Google, is expected to have a remarkable year in 2024. While Nvidia had an impressive run in 2023, with a 239% increase in stock price, Alphabet is poised to outperform its peers, including Nvidia. Despite already experiencing a strong 2023, with a 58% increase in stock price, Alphabet’s stock is still undervalued compared to Nvidia. This positions Alphabet for a potentially phenomenal year in 2024.

Alphabet’s primary business is advertising, accounting for nearly 80% of its revenue. While many investors focus on Alphabet’s artificial intelligence (AI) capabilities and cloud computing, the company’s ad business is what drives its success. In the third quarter of 2023, Google Search, one of Alphabet’s key advertising platforms, saw an 11% increase in revenue to $44 billion. YouTube, another major platform, also experienced a 12% growth in revenue during the same period. With ad spending expected to bounce back, Alphabet’s advertising business is showing signs of recovery.

Furthermore, Alphabet has been investing heavily in artificial intelligence, which is becoming a crucial part of its future. The company has made significant advancements in generative AI, with its Gemini platform leading the way. Gemini has proven its superiority in benchmark tests, surpassing human experts in multitask language understanding. While Alphabet has yet to monetize this platform, it is expected to do so in 2024, presenting a significant opportunity for further growth.

Another area of Alphabet’s AI aspirations is its cloud computing business, Google Cloud. Although currently sitting in third place in terms of market share, Google Cloud has been steadily growing above 20% year over year. As the company shifts its focus from growth at all costs to profitability, Google Cloud has the potential to contribute significantly to Alphabet’s bottom line in the long term.

Considering these strong tailwinds, Alphabet’s stock is attractively priced compared to its peers. With a forward earnings multiple of 20 times, Alphabet’s stock is trading at a reasonable valuation. In fact, it hasn’t been this low in quite some time. If Alphabet surpasses expectations, which is highly likely given its growth potential, the stock could outperform projected earnings, making it an even more attractive investment for 2024.

While Nvidia remains a strong player in the market, its stock has become overvalued. Investors looking for growth at a reasonable price may find Alphabet to be a better investment option. It offers significant growth potential, backed by a solid ad business, AI advancements, and an undervalued stock.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury, the author of this article, holds positions in Alphabet. The Motley Fool recommends Alphabet and Nvidia and has a disclosure policy.