Alphabet is a strong buy; recent price decline is an opportunity due to favorable valuation and competitive advantages in AI infrastructure.

Well, it's cheap today because the market fears that well, uh Google AI overviews or ChatGPT, these types of AI chatbots are stealing traffic or are taking traffic away from Reddit's website, and Reddit themselves have said that they've seen search traffic, Google traffic come down a little bit.

Obviously, you know, selling that data to the likes of Alphabet, no pun intended, provides a lot of upfront cash Reddit's traffic relies a lot on how Alphabet indexes its links, or Google, I should say, owned by Alphabet.

Well, I'm going to talk about Alphabet. Um this is a company I've been a shareholder in for many years. You know, the stock is trading at a trailing price to earnings ratio of right around 17 at the time we're recording this video.

I mean, Alphabet shares actually hit an all-time high back in May of this year. And at that point they shares of Alphabet had soared more than 150% in the prior year. So, they were among the 25 best performers in the S&P 500 index over that stretch, far outpacing a lot of the Mag 7.

Now, since that time we've seen Alphabet fall double digits from its peak. They've lost about 700 billion in market values. This has been a major drag on the S&P 500 in that span.

And there's some reasons for that. There's been concerns about whether the, you know, intense CapEx that they are are leveraging is actually improving their standing in the AI race.

Obviously, like all of the other Mag 7, they're spending on building out the infrastructure to develop their technology. You know, they lost a couple top employees to Anthropic and OpenAI. There's been some concern about that.

Um, you know, there's been some delays about their powerful AI model Gemini 3.5 Pro, although they did release the 3.7 flash model, which has been, you know, one of the fastest growing models to date.

They've seen their Gemma models surpass a billion downloads.

And a lot of the spending that Alphabet's doing right now, it's about making their tech faster. It's about cutting down the cost of running AI. You know, in their most recent quarter Alphabet's revenue hit $120 billion.

That was a 24% year-over-year increase. Google Cloud grew 82% to $25 billion. Um, now their infrastructure spending doubled to about $45 billion.

Now, unlike a lot of the other tech giants, Alphabet doesn't just buy all its AI chips from other suppliers. They are building their own custom AI chips called TPUs. And because they're they build their own hardware, they are able to handle a lot of the AI workloads and Gemini responses for a fraction of what it cost their competitors.

They They are still reliant on outside chips to be clear, but these tensor processing units, these TPUs, are really, really key, I think, to their competitive advantage long-term.

And it's changing the core business. I mean, obviously, search is what they're known for through Google search. They have really overhauled their traditional search engine into this active AI answer machine.

You know, AI overviews, obviously, is one example. And so, they are pushing up their search ad revenue. That grew 17% to over $63 billion in the last quarter.

Um Google Cloud's profits have tripled to about $9 billion. That's because, you know, Alphabet is using its AI models to help, you know, millions of businesses automate their ads.

And they're also on the enterprise side, uh helping their clients on Google Cloud. And so, they are proving that their heavy spending is bringing in that high margin revenue right away.

And then, you know, one final note I'll look at, we also look at a business that uh controls one of the largest media and streaming operations in the world, YouTube, right? YouTube accounts for about 30% of Alphabet's entire market value.

So, this is a company I continue to be extremely bullish on. I think you're getting one of the most profitable businesses um in their industry at a very favorable valuation right now.

I certainly don't think the pressure that we see have seen on the stock recently has been warranted, but maybe that's an opportunity for investors, too.

In 2025, I was talking about Alphabet maybe one too many times, as some some viewers might have noticed last year, but it it was extremely undervalued last year in my opinion. You're getting a lot of value right now as well.

Yes, of course the stock is much higher. Yes, it's worth more than $4 trillion, but as you said, cloud revenue accelerates. Not only does it accelerate, but margin expands as well at the same time.

You've got a backlog that continues to grow and grow. You've got them controlling basically everything that they own. TPUs, data center software, you name it.

Super profitable companies like a Google Alphabet are going to come out of this situation as much stronger companies because well, they could then go and shop around and see okay, you're a great company.

You seem to be struggling right now. We might just acquire you for 70 cents on the dollar or something like that. They can do it because okay, right now maybe free cash flow is again under pressure, but to the core it is a extremely profitable business.