Google’s parent company, Alphabet Inc. (GOOGL), is seeing its stock approach all-time highs thanks to significant growth in its artificial intelligence (AI) business. After a strong earnings report, Google is forming a bullish “three-weeks-tight” pattern, indicating potential for further gains.
AI and Cloud Business Growth
Alphabet experienced a robust first quarter, particularly in its Search, YouTube, and Cloud segments. Cloud revenue alone surged by 28%. However, Google faces fierce competition from other tech giants like Amazon (AMZN) and Microsoft (MSFT) in the cloud computing space.
CEO Sundar Pichai emphasized the company’s dedication to expanding its AI capabilities. He noted that Alphabet’s leadership in AI research and infrastructure, combined with its extensive global reach, positions it well for future AI innovations.
Investment in AI Infrastructure
In the first quarter of 2024, Alphabet’s capital expenditures soared by 91% to $12 billion compared to the same period the previous year. This significant investment is aimed at enhancing its AI infrastructure, including the development of new servers and data centers. Google’s AI assistant, Gemini, is being integrated into various products such as search, maps, writing tools, translation services, and image generation.
As part of its global strategy, Alphabet announced plans to invest $2 billion to establish its first data center in Malaysia. This center will support search, maps, and cloud services, as reported by the Wall Street Journal.
Strategic Partnerships
Alphabet is also entering strategic partnerships to boost its AI capabilities. It has teamed up with Japanese company Hitachi to promote AI technologies using Google’s cloud and Gemini AI. Additionally, Google Cloud is collaborating with Norway-based Opera (OPRA) to incorporate Gemini models into Opera’s Aria browser AI.
Stock Performance and Market Position
Google’s stock is on track to form a “three-weeks-tight” pattern with a buy point of $178.77, indicating a possible upward move. After breaking out of a second-stage cuplike base with a $153.78 buy point on April 1, the stock rose 10.2% following a strong earnings report on April 25. Despite a brief pullback, it reached a record high on May 20 and has gained about 24% year-to-date.
Financial Growth and Shareholder Returns
Alphabet’s first-quarter earnings grew by 53%, up from 42% in the previous two quarters. Revenue growth also improved, rising to 15% from 3% in the same period last year. In addition to this financial performance, Alphabet declared its first-ever dividend of 20 cents per share and announced a new $70 billion stock buyback program. FactSet estimates that Alphabet’s profits will grow by 35% in 2024 and 13% in 2025.
Investor Interest
Interest in Google stock is increasing among mutual funds. In March, 7,320 funds held Google shares, up from 7,241 in December and 7,135 in September. The stock’s up/down volume ratio of 1.6 suggests strong demand over the past 50 days. Notable funds like Fidelity Contrafund and MFS Growth Fund have significant holdings in Google, with 20 million and 17.5 million shares respectively.
Alphabet boasts a nearly perfect 99 IBD Composite Rating and a 98 EPS Rating, reflecting its strong overall performance and profitability.
Source: Kimberley Koenig, Investor’s Business Daily, May 30, 2024. You can check out the full article here.
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