Why Alphabet (Google) Leads in AI Stocks Now

Published Date : 21/09/2025 

Despite initial concerns, Alphabet's Google has emerged as a leader in the AI space, driving significant growth in its core businesses and cloud services. 

This top AI stock is up 75% since April.

There are several great companies capitalizing on the artificial intelligence (AI) boom that would make solid stocks to buy right now. But among leading tech giants, Alphabet (GOOG, GOOGL) stands out. The stock has surged over 75% since hitting a 52-week low in April, yet it still trades at a reasonable valuation. With 2 billion users and one of the best enterprise cloud services available, Alphabet is well-positioned to help investors outperform the market.

Image source: Getty Images.

### How Google is Benefiting from AI

Earlier in the year, some investors were concerned about Google's competitive position as more people started using ChatGPT and other models to look up information. However, this concern overlooked the power of Google's Gemini AI model, which has emerged as one of the best models out there.

Gemini powers all the company's consumer services, like Search, and it is making a significant difference in the company's financial performance. Revenue from Search, the company's largest business, grew 12% year over year in the second quarter. This momentum reflects increasing search queries with AI Overviews.

Google is also competitively positioned in cloud services. The number of new customers using Google Cloud jumped 28% quarter over quarter in Q2. Management credits this momentum to its global base of AI-optimized data centers, custom AI chips, storage, and software offerings.

It can't be emphasized enough that Google's AI capabilities are only possible because of the company's substantial free cash flow. It generated $67 billion in free cash flow over the last year, while spending $67 billion in capital expenditures for technology and AI infrastructure.

Google has the resources to deliver the best AI experiences for its users, yet Alphabet stock trades at a forward price-to-earnings multiple of 25. That's a reasonable multiple to pay for a company that just reported a 22% year-over-year increase in earnings last quarter.

### Conclusion

Alphabet's robust AI capabilities, combined with its strong financial position and growing user base, make it a compelling investment in the AI space. Despite the recent surge, the stock remains attractively valued, offering investors a solid opportunity to benefit from the ongoing AI revolution. 

Frequently Asked Questions (FAQS): 

Q: What is Google's Gemini AI model?

A: Google's Gemini AI model is one of the best AI models available, powering the company's consumer services like Search and driving significant improvements in financial performance.

Q: How has Google's Search revenue been affected by AI?

A: Google's Search revenue grew 12% year over year in the second quarter, reflecting the increasing use of AI Overviews in search queries.

Q: What is the current forward P/E ratio of Alphabet stock?

A: Alphabet stock trades at a forward price-to-earnings multiple of 25, which is considered a reasonable multiple given the company's strong earnings growth.

Q: How has Google Cloud's customer base grown recently?

A: The number of new customers using Google Cloud jumped 28% quarter over quarter in Q2, driven by the company's global base of AI-optimized data centers and advanced technology offerings.

Q: What is Alphabet's free cash flow and capital expenditure for the last year?

A: Alphabet generated $67 billion in free cash flow over the last year and spent $67 billion in capital expenditures for technology and AI infrastructure. 

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