The U.S. stock market has been extremely volatile since President Donald Trump rolled out hefty tariffs on goods from virtually every country this month, and that wild ride has continued in the wake of his move Wednesday to temporarily hold those new import taxes at 10% for all countries except China, for which he increased them to 145%.
These shifting trade policies and fears of how they'll impact both the broader economy and individual companies have left many investors searching for safer stocks -- companies that have the potential to be long-term winners regardless of how the current situation plays out.
While no investment is a sure thing, here are three reasons why buying Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) stock now could look like a great decision in years to come.
Image source: GETTY IMAGES.
1. Alphabet will benefit from AI for years to come
While other companies with exposure to the artificial intelligence (AI) trend might get more attention, Alphabet has a strong position in AI through its cloud infrastructure services and its Gemini chatbot.
Gemini can field questions just like other AI chatbots, but the advantage Alphabet has is that its bot can instantly reach current Alphabet users across many platforms and services. For example, the company has already infused Gemini into its Google Workspaces suite of services, its search results, and its Android operating system.
This is important because as AI improves, it will increasingly take over more tasks for users and transition into more of an AI agent role. Many tech leaders believe the agentic AI era is just getting started: At CES 2025 in January, Nvidia CEO Jensen Huang predicted it will become a "multitrillion-dollar opportunity" in the coming years. Another forecast by the researchers at Markets.Us anticipates the value of the AI agent market reaching $197 billion by 2034.
But that's not Alphabet's only AI opportunity. Google Cloud is the third-largest cloud computing infrastructure provider, holding a 12% share of the market. But while it trails Amazon and Microsoft, there's likely plenty of room for it to benefit: A Goldman Sachs Research report estimates that cloud revenue driven by artificial intelligence uses will reach $2 trillion globally in 2030.
2. Alphabet is massively profitable
Small growth companies can sometimes get more attention, but investors can miss good opportunities when they overlook companies that have less flash, yet are very profitable.
Consider that Alphabet's net income soared by nearly 36% to $100 billion in 2024, with earnings per share reaching $8.04. The company also improved its operating margin from 27% in 2023 to 32%. Just as impressive is the fact that Alphabet ended 2024 with $24.8 billion in free cash flow.
These financial metrics matter for any company at any point in time, but they're even more important right now as investors are trying to gauge the potential impacts of Trump's trade war and predict which companies will best be able to weather an economic slowdown.
3. Alphabet stock is relatively inexpensive
Most stocks aren't cheap right now, but plenty of them are less expensive than they were not all too long ago. Alphabet today trades at a price-to-earnings multiple of about 18 -- well below the P/E ratio of 26 it carried at this time last year. That's also significantly lower than the S&P 500's average of 24.
So investors have a chance to buy a major player in artificial intelligence at a better price than they could have gotten in the recent past, even as the company grows into solid long-term opportunities.
One thing investors should keep in mind
While Alphabet's long-term opportunities are intact, it's important for investors to know that the current uncertainty in the economy stemming from President Trump's tariffs is a genuine risk right now. Alphabet makes 75% of its revenue from advertising and those sales are likely to fall if a recession, or even a slowdown, occurs.
For example, Alphabet's net income tumbled 21% in 2022 as companies pulled back ad spending on fears of a recession. A full blown recession never materialized, but even the threat of one was enough to diminish ad spending.
That doesn't mean Alphabet won't be a good long-term investment, but it does mean investors may have to weather some difficult times with the company and its stock over the short term.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
