Alphabet has demonstrated a strong resurgence, with its stock up 29% YTD, fueled by robust performance in Google Search and YouTube, and significant growth in Google Cloud, which now exceeds $50 billion in annual recurring revenue with 32% YoY growth. The company's Gemini AI, particularly its viral Nano Banana image editor, has rapidly gained traction, attracting 23 million new users and briefly surpassing ChatGPT in app downloads, intensifying the consumer AI competition. Despite briefly exceeding a $3 trillion market cap, Alphabet's P/E of 26 is considered attractive relative to peers, supported by consistent capital returns, suggesting continued investment appeal across its diversified, high-growth segments.
Key PointsAlphabet's other divisions are doing well, especially Google Cloud. Despite its soaring price, Alphabet's stock still looks cheap today. - 10 stocks we like better than Alphabet › Alphabet's other divisions are doing well, especially Google Cloud. Despite its soaring price, Alphabet's stock still looks cheap today. In 2023 and 2024, Wall Street left Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) for dead (figuratively). The company was supposedly going to be disrupted by the new artificial intelligence (AI) chatbot called ChatGPT, which now has 700 million weekly and 190 million daily active users. Since then, Alphabet has gotten back on its feet. Revenue growth for Google Search hasn't skipped a beat, with the stock generating a return of 29% for shareholders year to date. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Now, the company is pressing even harder on the accelerator pedal to compete with ChatGPT -- made by OpenAI -- as new tools are added to its Gemini AI. One that has gone viral is its imaging editing software called Nano Banana. As of this writing, Gemini is the most popular free app in the Apple App Store (based on downloads). Does that mean Alphabet just (figuratively) killed OpenAI by becoming the best AI stock to own today? Alphabet now has its own viral imaging service In late August, Alphabet began rolling out its new image editor for Google Gemini users on a selective basis. The imaging tool is a leap in capabilities from anything else out there today, allowing users to easily create new scenes with themselves, combine characters from images, or imagine completely new scenes. Its lifelike capabilities have driven viral usage of the product, with users making hundreds of millions of images already. The program's popularity has driven a huge boost in downloads for the Gemini mobile application. It recently surpassed ChatGPT to become the No. 1 downloaded application on Apple's App Store for several weeks (although it fell to No. 2 this week, behind a new video editing app from OpenAI called Sora). On Sept. 8, Alphabet announced that 23 million new users had already tried Gemini due to the Nano Banana imaging service. ChatGPT has significantly more users than Gemini: 190 million daily users compared to 35 million for Gemini as of the latest company updates. Now, it looks like Gemini may be gaining on OpenAI's flagship mobile application, and quickly. This doesn't mean that OpenAI or its ChatGPT app is dead. ChatGPT is now the third-most popular app on the App Store, and OpenAI's video-editing app is the new No. 1. But this may now be a three-horse race in consumer AI tools instead of a winner-takes-all scenario. This leapfrog in downloads has investors more excited about Alphabet stock. The company recently eclipsed a market cap of $3 trillion (it is currently worth $2.97 trillion), making it one of four stocks in history to surpass that valuation milestone. Alphabet is more than just Gemini It is nice to see Alphabet start to win in AI, which should be a relief for shareholders. But the company is more than just viral Gemini tools. Google Search revenue grew to over $50 billion last quarter. YouTube advertising does close to $10 billion in revenue every quarter. Google Cloud is growing like gangbusters and recently surpassed $50 billion in annual recurring revenue (ARR). The cloud may be the secret gem that drives Alphabet's growth over the next few years. It is growing revenue 32% year over year, and management still believes it is way behind the curve in getting data center capacity up for its clients. As the company budgets more for capital expenditures, that will lead to more revenue growth over the next three years. Plus, the segment is now doing $2.8 billion in quarterly operating income with margins of over 20%. Is Alphabet the best AI stock to buy? Alphabet is firing on all cylinders today. Gemini is going viral, while the company's moneymakers are posting consistent growth. Management is consistently returning cash to shareholders through buybacks and dividends. The company just started paying a dividend that yields 0.33%, while buybacks have brought the number of shares outstanding down 11% in the last five years. But is the stock cheap after surpassing a $3 trillion valuation? I still think it is. Alphabet has a price-to-earnings ratio (P/E) of 26 as of this writing, which is cheaper than most other "Magnificent Seven" stocks. With everything the company has going for it in the age of AI, combined with its capital returns program, the stock still looks like a good bet for investors for the rest of this decade. Should you invest $1,000 in Alphabet right now? Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $621,976! Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,150,085! Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 191% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor. Stock Advisor returns as of September 29, 2025 Brett Schafer has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Alphabet has successfully countered concerns of AI disruption, evidenced by a 29% year-to-date stock return and robust operational performance. The company's Gemini AI, propelled by the viral 'Nano Banana' image editor, has demonstrated significant competitive traction, attracting 23 million new users and briefly becoming the most downloaded app on Apple's App Store. While its 35 million daily active users still trail ChatGPT's 190 million, Gemini's rapid gains suggest the consumer AI market is evolving into a multi-player race rather than a winner-takes-all scenario. Beyond the AI narrative, Alphabet's core segments exhibit strong fundamentals. Google Search revenue exceeded $50 billion last quarter, while Google Cloud has emerged as a critical growth engine, surpassing $50 billion in annual recurring revenue with 32% year-over-year growth and achieving a quarterly operating income of $2.8 billion at over a 20% margin. Despite its market capitalization briefly exceeding $3 trillion, the stock's price-to-earnings ratio of 26 remains attractive relative to its 'Magnificent Seven' peers, supported by a disciplined capital return program that includes a new 0.33% dividend and an 11% reduction in shares outstanding over five years.
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