Why Alphabet Is A Top AI Stock For 2030
The launch of ChatGPT has shifted how many investors view Google's parent company, Alphabet. For years, Alphabet dominated the digital advertising space thanks to Google Search. However, as generative AI has gained popularity, Google Search's market share has dipped slightly, raising questions about the company's long-term trajectory.
Despite these concerns, a closer look reveals compelling reasons to remain confident in Alphabet stock. Here’s a breakdown of why Alphabet is positioned for considerable growth over the next five years.
Image source: Alphabet, Inc.
Alphabet's Evolving Business Model
Alphabet has traditionally relied on digital advertising for most of its income, which still accounted for 74% of its revenue in the first half of the year. The concerns about this model are understandable. Alphabet earns money by sending traffic to websites from its search engine and other platforms like YouTube.
Generative AI like ChatGPT provides answers directly, which could mean less traffic is directed to external websites, potentially disrupting the core revenue model. Since Google Search now uses its own AI, Gemini, to provide similar direct answers, it could also see a reduction in ad-based revenue from search clicks.
However, Google Search has proven to be remarkably resilient, holding onto a market share of nearly 90%. At the same time, YouTube has grown into a dominant streaming service with a solid ad-driven model that poses a real challenge to competitors like Netflix.
More importantly, Alphabet has been actively diversifying its revenue. Google Cloud is the most prominent example, growing to 14% of the company's revenue in the first half of 2025, up from 12% in the prior year. Investors should also watch Waymo, its autonomous driving division. A recent fundraising round valued Waymo at $45 billion, and with partnerships with Uber, Toyota, and Hyundai, it's becoming a key player in the automotive industry. As these non-ad businesses grow, Alphabet's reliance on ad revenue will decrease, mitigating the potential impact of AI on its search business.
A Look at the Financials
Alphabet's financial health shows that fears about its business model have not halted its growth. In the first half of 2025, the company brought in $187 billion in revenue, a 13% increase from the same period in 2024. With slower growth in expenses, net income surged to $63 billion in the first half of the year, a 33% annual increase.
Even with a commitment to spend $75 billion on capital expenditures in 2025, the company maintains $95 billion in liquidity, giving it one of the strongest balance sheets available. Furthermore, Alphabet generated almost $67 billion in free cash flow over the past year. This provides incredible flexibility to invest in the business or return value to shareholders.
Although the stock underperformed the S&P 500 over the last year amid market concerns, it has climbed over 30% from its recent lows. Currently, its price-to-earnings (P/E) ratio is just 21. This not only makes it the most affordable stock among the "Magnificent Seven" but also makes it seem inexpensive given its consistent growth.
Why Alphabet Remains a Smart Investment
Alphabet's low valuation and evolving business model could set it up for major growth by 2030. While questions about the future of search-based advertising are valid, the company's massive liquidity and free cash flow give it the power to develop other ventures while rewarding investors.
As Google Cloud, Waymo, and other enterprises make up a larger portion of revenue, Alphabet is likely to thrive. Its low P/E ratio suggests this potential is currently underappreciated by the market, presenting a significant opportunity for investors.
