The Nasdaq Composite index has shown significant growth over the past year, increasing by more than 18% fueled by a strong rally in technology stocks benefitting from factors like artificial intelligence (AI). However, the index has recently experienced a pullback.
In the last month, the Nasdaq Composite index has dropped over 10% amid uncertainties in the market regarding AI’s ability to drive substantial growth for large tech companies. One such company affected by this sell-off is Alphabet, with its shares declining by 12.5% since July 23, following results that exceeded Wall Street’s expectations.
Despite this downturn, this situation presents an opportunity for investors to consider investing in a top AI stock at an appealing valuation.
Alphabet reported its second-quarter 2024 results on July 23, showing a 15% year-over-year increase in revenue to $84.7 billion and a 31% growth in adjusted earnings to $1.89 per share. The company’s aggressive capital spending, however, has raised concerns among investors, particularly with a significant increase in capital investments to support AI products and services.
At the same time, Alphabet’s strategic focus on integrating AI tools within its businesses, such as Google Cloud and advertising, has shown promising results. The growth of Google Cloud revenue and the positive impact of AI-driven advertising tools demonstrate Alphabet’s potential for accelerated growth in the long term.
Furthermore, analysts expect Alphabet’s earnings to grow by 32% in 2024, indicating positive prospects for the company’s financial performance. With Alphabet’s stock trading at 24 times trailing earnings, investors may find value in this AI stock, especially considering the current market conditions and long-term growth potential.
