Best stocks: Defense, including these 2 names, may be in secular bull market as global conflicts mount
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — Good morning, the events unfolding in the Middle East over the past week have led to sharp price gains for a few of the names on our Best Stocks list. In recent weeks, we've written about Axon Enterprise (AXON) and RTX Corp (RTX) , two aerospace and defense names that were on the verge of major breakouts at the time we wrote them up about a month ago. Well, those breakouts have happened. I'll update my risk management comments below. Sean is also going to bring you up to speed on the sector leaderboard and some stuff about geopolitical shocks. Have a great week. Sector Leaderboard As of 6/16/2025 morning, there are 116 names on The Best Stocks in the Market list Top Sector Ranking: Top Industries: Top 5 Best Stocks by Relative Strength: Sector Spotlight: Energy Sean — Geopolitical events often spark sharp, short-term moves in energy and aerospace stocks. We have seen this a number of times in just the past few years: Ukraine-Russia in 2022, Israel-Hamas in 2023, and now escalations in Iran. For energy companies, disruptions in oil supply chains or uncertainty around resource access can lead to price spikes in crude and natural gas. Last Friday, WTI was up 7% following the attack in Iran. Similarly, aerospace and defense stocks typically benefit from increased defense spending, elevated security concerns, or government stimulus aimed at military readiness. In the immediate aftermath of geopolitical shocks, these sectors often outperform broader indices as investors seek refuge in assets tied to national security and resource control. We currently have 4 stocks on our list in the energy sector: EQT , EXE , KMI , and WMB, all four of which we mentioned on our piece released on May 22. Over the past month, EXE is up 2.8% and WMB is up 2.7%, both outperforming the S & P 500 up 1.6% while EQT and KMI are underperforming over that period, up .9% and .7% respectively. Sector spotlight: Aerospace Looking at aerospace, we mentioned AXON and RTX on May 19 - see story date in red circle on charts: AXON: RTX: These unfortunate events often prompt a swift reassessment of defense spending assumptions, both in market forecasts and government policy planning. Investors price in these changes, anticipating higher revenues for defense contractors and suppliers. Even the perception of sustained geopolitical risk can extend spending tailwinds, as nations reevaluate long-term defense strategies, upgrade outdated systems, and invest in next-gen technologies like cybersecurity, drones, and missile defense. This shift in assumptions is reflected by price, and we're seeing it happen in real time. Below is AXON and RTX vs the S & P 500 since we mentioned them on May 19: Over the long run, the fundamental value of energy and aerospace stocks (and all stocks) are influenced by structural and secular trends, not one-off conflicts. Markets tend to normalize after the initial wave of uncertainty fades. That said, energy and aerospace remain among the best portfolio hedges during periods of geopolitical instability. Their performance is often counter-cyclical to the risk-off sentiment we see, offering diversification when other sectors fall. Investors can view these holdings not as reactionary plays, but as strategic insurance against global volatility. Risk Management Josh — I think we're in a secular bull market for defense-oriented stocks, unfortunately for the world. I don't know what's going to happen with all of these international conflicts, I can only tell you they don't seem to be calming down. There's war in the Middle East, in the heart of Eastern Europe and, as always, the threat of China doing something aggressive with respect to Taiwan is going to be a constant. By which I mean to say, investors can let their stops run wide and give these names a longer leash to recover from sell-offs. In the chart above, you can see a volume spike accompanied by a slightly overbought RSI reading above 70. There are people who will tell you this is a reason to sell. Those people eat crayons and do not know what they're talking about. RTX is one of the leading suppliers of rockets, missile systems and both military and civilian aircraft engines. I think it'll hold its uptrend given this backdrop. Just in case it doesn't, traders may want to utilize the $130 area as a place to reduce exposure. Investors can use the 50-week moving average around 120 as a trailing stop. If I were long, I would update my stop loss order each Friday. On Axon, I said the following when we first put a spotlight on the name in mid-May: "As you can see below, this is a breakout in progress. Short-term traders would use $700 as a pivot point. Investors may want to set a stop at the top of that gap around the $600 level. A pullback on light volume could help the stock work off its slightly overbought momentum and may provide a good entry." Now that the breakout has taken place, I would be raising that investment stop up to the rising 50-day near $665. That would represent a drop of 15% and below that level the story is muddier, even though the name would likely stay on the Best Stocks list. See the chart below: Traders can choose their own adventure depending on time frames and tax consequences. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
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How major US stock indexes fared Monday, 6/16/2025
Calm returned to Wall Street, and U.S. stocks rallied, while oil prices gave back some of their initial spurts following Israel's attack on Iranian nuclear and military targets at the end of last week. The S&P 500 climbed 0.9% Monday to recover most of its drop from Friday. The Dow Jones Industrial Average added 0.8%, and the Nasdaq composite rose 1.5%. They joined a worldwide rise for stock prices. The price for a barrel of benchmark U.S. oil fell by 1.7%, while the price of gold eased. Treasury yields rose ahead of a meeting by the Federal Reserve this week. On Monday: The S&P 500 rose 56.14 points, or 0.9%, to 6,033.11. The Dow Jones Industrial Average rose 317.30 points, or 0.8%, to 42,515.09. The Nasdaq composite rose 294.39 points, or 1.5%, to 19,701.21. The Russell 2000 index of smaller companies rose 23.62 points, or 1.1%, to 2,124.13. For the year: The S&P 500 is up 151.48 points, or 2.6%. The Dow is down 29.13 points, or 0.1%. The Nasdaq is up 390.42 points, or 2%. The Russell 2000 is down 106.03 points, or 4.8%.
Yahoo
an hour ago
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Stock market today: Dow, S&P 500, Nasdaq jump, oil slides amid hopes Israel-Iran conflict stays contained
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The three companies supply weapons to Israel through contracts with the US government. Palantir (PLTR) rose a more modest 1.6% Friday but was up 2.2% before the market open Monday. Shares of Sarepta (SRPT) plunged 40% in premarket trading on Monday after the company said a second patient died of liver failure while taking its experimental gene therapy, Elevidys. Sarepta paused its clinical trial and halted shipments of the treatment to patients who are unable to walk. News of the death comes after another patient died of acute liver failure in March, which raised concerns over the drug's safety. The therapy is used to treat Duchenne muscular dystrophy, a rare muscle disorder. The focus at this week's Federal Reserve meeting is on whether policymakers are still committed to two interest-rate cuts this year, Yahoo Finance's Jennifer Schonberger reports: Read more here. 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Kering's ( Paris-listed shares rose 9% in premarket trading on Monday, after reports emerged that Renault's chief executive, Luca de Meo would become head of the French luxury goods group Gucci. Tesla (TSLA) stock was up 1% on Monday before the bell, rebounding from losses earlier in the Month due to CEO Elon Musk and President Trump's feud. Renault's ( stock dropped over 6% on news that its CEO Luca de Meo has decided to leave. The Italian who turned around the French automaker has been recruited by Kering (PPXB.F, PPRUF) to perform a similar feat at the luxury goods maker, according to Bloomberg. Shares of Kering rose almost 10% in Paris as investors welcomed the report that de Meo will be appointed as the Gucci owner's CEO in coming days. Bloomberg reports: Read more here. Greetings from Cannes Lions, where I am stationed for the week talking with top advertising execs, sports stars and CEOs. Tough assignment! I have found this event to be very useful each year in helping to understand the economy into year end. You would be surprised how forward-looking market spend trends are at the world's biggest companies. To that end, I just got off set with Disney's (DIS) president of global advertising Rita Ferro — one of the top names in the marketing industry. I asked her if a slowing US economy and general macro volatility were beginning to chip away at ad budgets. She wasn't super bullish about ad spending — more cautiously optimistic. Businesses are buying ads once they see they need them, rather than making large commitments on ad spend early, she suggested. "I think people are being very intentional where they spend money," Ferro tells me. "I would say they're [the data points she watches] not recessionary. We see much closer in buying." Gold prices rose as the conflict erupting between Israel and Iran pushed investors toward safe-haven assets in a broader risk-off move. Bloomberg reports: Read more here. US stocks rallied on Monday as investor optimism grew surrounding the possibility of a deescalation in the conflict surrounding Israel and Iran after a report indicated Tehran may be willing to resume nuclear program talks. The Dow Jones Industrial Average (^DJI) rose roughly 0.7%, while the S&P 500 (^GSPC) moved up 0.9%. The Nasdaq Composite (^IXIC) gained 1.5%. Stocks hit session highs after the Wall Street Journal reported that Iran may be willing to restart talks over its nuclear program in an effort to deescalate the conflict with Israel, which entered its fourth day on Monday. Oil prices slid more than 2% during the session over the prospects that the conflict's impacted on supply from OPEC's third largest producer will remain limited. Yahoo Finance's Josh Shafer reports: Read more here. Uranium-related stocks surged to 52-week highs on Monday, fueled by renewed investor optimism around nuclear energy as a key component for the AI boom. The Global X Uranium ETF (URA) jumped 7% on Monday, highlighting growing interest in uranium miners and nuclear technology providers such as Cameco (CCJ), Oklo (OKLO), and NexGen Energy (NXE). The rally comes on the heels of recent executive orders from the Trump administration supporting the industry at a time when data center demand for power soars. Wall Street expects increased uranium use in nuclear plants as the US and other countries extend the life of existing reactors and commit to cutting-edge technologies using small modular reactors. Yahoo Finance's Pras Subramanian reports: Read more here. Yahoo Finance's Brooke DiPalma reports: Read more here. Bank of America (BAC) analyst Brad Sills downgraded CoreWeave (CRWV) stock to Neutral from his previous Buy rating, citing the AI cloud company's high valuation. "Following Q1 results, the stock has run up 145%," Sills wrote, adding that he believes "much of the near-term upside has been priced in." Sills noted that CoreWeave is trading at 27 times its 2027 earnings, more than previously. He also noted CoreWeave's significant debt. "We forecast $21 billion of negative FCF [free cash flow] through CY27, driven by high capex ($46.1 billion through CY27)," Sills wrote. "Historically, CoreWeave has funded 85% of capex with debt." "Therefore, it is critical that the company have access to reasonably priced debt," he continued. "In the recent debt raise, the company raised $2 billion of debt at 9.3% interest rate, down from 11% in CY24. However, this remains a small % of the total incremental debt required from here, raising some questions, in our view." Despite the downgrade, Sills raised his price outlook on the stock to $185 from $76. CoreWeave stock rose 4.6% on Monday. CoreWeave is an Nvidia-backed (NVDA) firm that holds one of the largest pools of the chipmaker's GPUs. It reported its first quarterly earnings results as a public company in May, featuring soaring revenue and a bullish revenue outlook for the year, on a $4 billion deal with ChatGPT maker OpenAI. Still, some analysts have questioned what they believe is a risky business model. Circle Internet Group (CRCL) stock jumped as high as 18% on Monday to an intraday high, continuing the stablecoin issuer's meteoric rise following its blockbuster IPO earlier this month. The stock climbed to $165 before trimming gains, building on Friday's 25% surge. Circle has repeatedly appeared on Yahoo Finance's trending tickers list in recent sessions as investor enthusiasm for stablecoins — digital tokens backed by reserve assets like the US dollar — continues to grow. Since its highly anticipated debut on June 5 at $31 per share, Circle has soared more than 400%. Nvidia (NVDA) stock gained more than 2%, moving closer to a fresh record as the overall market rallied. The AI chip giant traded above $145 per share, just a stone's throw away from its Jan. 6 record close of $149.43. Stocks moved to session highs on Monday after a report that Iran is looking to deescalate the conflict with Israel. Oil extended a session decline to slide more than 4%, after spiking more than 7% on Friday as Israel and Iran exchanged strikes. The market moves on Monday came as the Wall Street Journal reported Tehran may be willing to restart talks over its nuclear program, a move intended to limit the conflict. Roku (ROKU) stock surged more than 10% on Monday after the streaming platform announced a partnership with Amazon (AMZN) Ads to create the "largest authenticated Connected TV (CTV) footprint' in the US. Roku and Amazon said in a joint statement that the deal will allow advertisers access to an estimated 80 million US CTV households — more than 80% of the total— through Amazon's demand-side platform (DSP). The companies said early tests of this integration have shown 'significant' results. 'Advertisers using this new solution reached 40% more unique viewers with the same budget and reduced how often the same person saw an ad by nearly 30%, enabling advertisers to benefit from three times more value from their ad spend,' said the statement. The major averages opened higher on Monday, while oil pulled back as the Israel-Iran conflict entered its fourth day. The Dow Jones Industrial Average (^DJI) gained about 0.5%, while the S&P 500 (^GSPC) moved up 0.6%. The tech-heavy Nasdaq Composite (^IXIC) rose 0.7%. Oil (CL=F), which rose sharply on Friday, pulled back as traders assessed the scope of the ongoing conflict between Israel and Iran. Investors are focusing this week on the Federal Reserve meeting and policy decision. Market participants overwhelmingly expect policymakers to hold interest rates steady on Wednesday. Strategy (MSTR), the largest corporate holder of bitcoin, reported in a filing to the Securities and Exchange Commission that it purchased $1.05 billion worth of bitcoin between June 9 and June 15. Strategy, which is chaired by crypto tycoon Michael Saylor, has spent $41.8 billion to purchase 592,000 bitcoins since 2020, holding the cryptocurrency as its primary treasury reserve asset. Shares of MSTR rose 1.4% in premarket trading. The stock is up roughly 3,000% since the software firm first bought bitcoin on Aug. 10, 2020. Northrop Grumman (NOC), RTX (RTX), and Lockheed Martin (LMT) traded roughly flat in premarket Monday after rallying in the prior trading session. The defense stocks had climbed Friday after Israel launched a series of airstrikes on Iran, raising tensions in the Middle East and heightening fears of a broader regional conflict. Northrop Grumman stock gained nearly 4%, while Lockheed Martin and RTX shares rose over 3%. The three companies supply weapons to Israel through contracts with the US government. Palantir (PLTR) rose a more modest 1.6% Friday but was up 2.2% before the market open Monday. Shares of Sarepta (SRPT) plunged 40% in premarket trading on Monday after the company said a second patient died of liver failure while taking its experimental gene therapy, Elevidys. Sarepta paused its clinical trial and halted shipments of the treatment to patients who are unable to walk. News of the death comes after another patient died of acute liver failure in March, which raised concerns over the drug's safety. The therapy is used to treat Duchenne muscular dystrophy, a rare muscle disorder. The focus at this week's Federal Reserve meeting is on whether policymakers are still committed to two interest-rate cuts this year, Yahoo Finance's Jennifer Schonberger reports: Read more here. Here are some of the biggest stories you may have missed over the weekend and early this morning: Economic data: Empire manufacturing activity (June) Earnings: No notable earnings. How many Fed cuts ahead? We (and Trump) are about to find out. EU set to accept flat 10% US tariff — with conditions Mideast tensions, Fed's 'dot plot': What to know this week Oil erases gain as Iran-Israel attacks spare critical flows Why Wall Street doesn't see Fed rate cuts coming anytime soon Investors shun long-term US bonds as rate-cut hopes fade Israel-Iran attacks enter 4th day with no deal in sight Here are some top stocks trending on Yahoo Finance in premarket trading: United States Steel Corporation (X) stock was up 5% before the bell on Monday after President Trump approved of Japan's Nippon Steel's take over of the company. Trump the gave the green light to the $14.9B bid for US Steel on Friday, removing a key hurdle in Nippon's 18-month pursuit of the business. Kering's ( Paris-listed shares rose 9% in premarket trading on Monday, after reports emerged that Renault's chief executive, Luca de Meo would become head of the French luxury goods group Gucci. Tesla (TSLA) stock was up 1% on Monday before the bell, rebounding from losses earlier in the Month due to CEO Elon Musk and President Trump's feud. Renault's ( stock dropped over 6% on news that its CEO Luca de Meo has decided to leave. The Italian who turned around the French automaker has been recruited by Kering (PPXB.F, PPRUF) to perform a similar feat at the luxury goods maker, according to Bloomberg. Shares of Kering rose almost 10% in Paris as investors welcomed the report that de Meo will be appointed as the Gucci owner's CEO in coming days. Bloomberg reports: Read more here. Greetings from Cannes Lions, where I am stationed for the week talking with top advertising execs, sports stars and CEOs. Tough assignment! I have found this event to be very useful each year in helping to understand the economy into year end. You would be surprised how forward-looking market spend trends are at the world's biggest companies. To that end, I just got off set with Disney's (DIS) president of global advertising Rita Ferro — one of the top names in the marketing industry. I asked her if a slowing US economy and general macro volatility were beginning to chip away at ad budgets. She wasn't super bullish about ad spending — more cautiously optimistic. Businesses are buying ads once they see they need them, rather than making large commitments on ad spend early, she suggested. "I think people are being very intentional where they spend money," Ferro tells me. "I would say they're [the data points she watches] not recessionary. We see much closer in buying." Gold prices rose as the conflict erupting between Israel and Iran pushed investors toward safe-haven assets in a broader risk-off move. Bloomberg reports: Read more here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
an hour ago
- Yahoo
Why Alphabet's AI Infrastructure Makes Today's Price a Bargain
So far in 2025, Alphabet (Google) has been the worst performer among the Mag 7, with the stock down about 11% YTD. Since February, I've watched the share price drop hard from around $207 to $141 before bouncing back to about $170 today. While the S&P 500 has recovered most of its losses, Google has barely clawed back a third of what it lost, which really highlights just how much it's lagging behind the broader market. Warning! GuruFocus has detected 7 Warning Signs with JYD. GOOG Data by GuruFocus Sure, the broader macro environment has played a role, but I think investors have mostly been spooked by bigger issues like rising fear around AI disrupting Google Search, the antitrust drama in the U.S. about its ad dominance, and newer players like DeepSeek stirring up competitive pressure. On top of that, there's a lot of debate over whether Google is spending too much on AI. Even with all this noise, I personally think Google looks quite attractive here. The company is still growing its revenue at double-digit rates, margins are improving, free cash flow is strong, and the shareholder return is nothing to ignore around 4% annually when you add in buybacks and dividends. At about $170 per share, I see Google as a rare combo of a solid growth business trading at a pretty reasonable price, and in this market, that's not easy to find. One thing that really stands out about Google is how it controls nearly everything in-house. Unlike other AI companies, Google doesn't need to rely on third-party infrastructure. It already has an extensive global network of data centers built out over years to power search, and now it's doubling down by building more of them to support AI. This is a big deal because OpenAI, for example, doesn't have the ability to build these data centers by itself, which is why it's closely partnered with Microsoft. While Microsoft can match Google in terms of investment power, it still relies on OpenAI for models like ChatGPT. That creates a different kind of setup compared to Google's tighter integration between its models (like Gemini) and its own infrastructure. I think this gives Google a real edge when it comes to competing in AI, because it owns the entire tech stack and has direct access to the world's largest information index. It also means Gemini can scale more efficiently and deliver better performance long term since everything runs within Google's own systems. From my point of view, this is a big strategic advantage that I don't think gets enough attention. A lot of investors seem worried about how much Google is spending on AI and building more data centers. Personally, I don't see this as a bad thing. If anything, it shows that Google is taking its position seriously and investing to stay ahead. It's not just throwing money around it's trying to protect its edge and make sure it remains a major player in AI and data. I believe these investments are a sign of long-term commitment and not a red flag. Google's ability to collect, manage, and use information at scale puts it in a unique position compared to competitors who need to rent capacity or partner up just to keep up. One of the loudest bear arguments is that tools like ChatGPT are taking away from Google's core search business. I hear this all the time, but when I look at the numbers, it just doesn't add up. Based on Bank of America data, Google only lost 6 basis points of market share month-over-month which is less than 1% annualized. That's barely a dent, especially when you consider the market itself is still growing. Some people are saying search is over because users turn to AI now, but Google's Search revenue tells a different story. Back in 3Q22 before ChatGPT launched Google's Search & Other revenue was around $39.5 billion. That number grew to over $50.7 billion in 1Q25. Adjusted for seasonality, search is doing better than ever. I think people are confusing a shift in habits with actual revenue loss, which just isn't the case yet. Plus, even if a company like Apple builds its own AI, it would still need massive data resources to make it useful and a lot of that web data is indexed by Google anyway. There's also a big difference between losing market share on commercial queries versus non-commercial ones. Google only shows ads on around 20% of queries, which are the ones that actually bring in money. Losing non-monetizable traffic isn't the same thing as losing revenue. Also, if the overall pie of search traffic grows, a smaller share could still mean a bigger slice in real dollar terms. Another piece I think people forget about is Waymo. On the last earnings call, Sundar Pichai mentioned that Waymo is now handling about 250,000 driverless rides per week that's five times what it did a year ago. I see Waymo as a kind of hidden upside for Google. Some outside investors, like Andreessen Horowitz and T. Rowe Price, already own a piece of it, and Bloomberg values it close to $50 billion. Waymo's expansion plans for 2025 include big cities like Miami, Atlanta, and Washington, D.C., and even small market success could unlock a lot of value. I think of it like a long-term option built into Google. It's not driving profits yet, but it has the potential to be a big win if self-driving technology takes off. While a lot of people are caught up in the AI hype, I've noticed something else: Google's core business is actually reaccelerating. In the most recent quarter (April 24), revenue grew 12% YoY which beat earlier expectations of around 10%. I believe Search is bouncing back because of strong demand for ad space and high-intent queries that drive better monetization. YouTube is also gaining momentum again. Shorts is pulling in more users, and ad revenue on YouTube was up 10% YoY. Cloud revenue came in a bit lighter than Azure, at 28% growth, but that's mainly due to temporary capacity issues. Google already said it plans to fix that later this year, so I'm not too concerned. In fact, I think Cloud will speed up again once more infrastructure comes online. Google's push into AI is expensive, no doubt, and R&D has taken a toll on margins. But overall, profitability is still strong. Last year's gross margin was around 58.5%, and I think this will keep trending up as Google moves away from pure ad revenue and leans more into Cloud and AI. Operating margin might have dipped recently, but I expect it to rise from about 33% now to around 36% by 2030 and possibly 38% by 2034 as they scale up. One risk I do see is the huge $75 billion CapEx spend, which will likely put pressure on free cash flow in 2025. But I also think this is just a short-term issue. CapEx should come down a bit over the next couple of years as a percentage of revenue. And honestly, Google can afford it. With nearly $95 billion in cash and only around $11 billion in debt, they're in a great spot financially. Even with the elevated CapEx, Google still has the ability to pay a dividend (even though the growth wasn't as high as I expected), continue stock buybacks, and even go after big acquisitions like the purchase of Wiz, the cybersecurity company. So, while high spending might look scary at first glance, I think it's part of a solid long-term strategy to stay ahead. To me, Google really feels like it's trading more like a classic value stock than a typical high-growth tech name. Right now, it has solid double-digit revenue and earnings growth that I think can keep going strong for years. But despite that, it's only trading at around 19x earnings. That's not just low when compared to peers like Amazon or Nvidia with P/Es of 30x or even 50xit's actually below the market average. And this is for a company that's still growing fast and sitting at the center of the AI boom. GOOG Data by GuruFocus Over the past decade, Google's average P/E has hovered closer to 30x. So to me, the current valuation looks like the market is already pricing in some worst-case scenariolike Apple cutting ties with Google Search or some other disruption in its core business. But when I look at the company's actual performance, I just don't see any real weakness in execution. The fundamentals still look very strong. In fact, I see other companies in the market with just steady performance and no real AI growth story, and they're still trading around 25x earnings. That tells me Google's stock already justifies its current price purely on the strength of the existing business. And if I factor in all the upside from AI, cloud, YouTube, and Waymo, it seems clear the market is being too cautious. I believe this is where the opportunity lies. If Google can keep delivering and showing its edge in AIthanks to its search engine, data scale, and infrastructureI think we could see its P/E multiple expand back toward 25x over the next year or two. That would push the stock toward a target price of $224, which is more than 30% higher from here. Considering the company's vertical integration, resource advantage, and long-term prospects, I'm confident this upside is very much within reach. That's why I'd recommend buying Google stock. I believe there's a strong case for long-term upside, and right now, it feels like you're paying a fair price just for the current businesswith all the AI growth coming basically for free. I also dug into the latest 13F filings to see what the marquee investors are doing with GOOG, and it adds another layer to my bullish case. First Eagle Investment (Trades, Portfolio) stepped up its stake by about 7.5%, Seth Klarman (Trades, Portfolio) jumped in with a massive 45.7% increase, and David Tepper (Trades, Portfolio) added nearly 7% more shares. Meanwhile, Renaissance Technologies (Trades, Portfolio) initiated a new position, which to me signals that a quant giant sees real value here. Even Tom Gayner (Trades, Portfolio) at Markel didn't trim his holding, despite the market wobble. At the same time, a number of long-term holders like Dodge & Cox, Primecap, and Baillie Gifford (Trades, Portfolio) only made modest reductionsmostly under 6%which tells me they're simply rebalancing, not bailing out. In my view, when you see heavy hitters like Klarman and Tepper adding, alongside quants jumping in, it underlines that smart money believes Google's pullback is a buying opportunity. That collective vote of confidence from such a diverse set of gurus bolsters my conviction that Google is attractively priced right now. Google's pullbackdown about 11% YTD and lagging the rest of the Mag 7doesn't reflect the strength I see in its business. At roughly 19x earnings, Google trades well below its 10-year average of nearly 30x and below peers even without the same AI story. I believe the market has overreacted to fears of AI search disruption and Apple's potential moves, and in doing so, it's underpricing a company that still delivers double-digit revenue and earnings growth, expanding margins, and robust free cash flow. The real pivot here is Google's shift into a fully integrated AI platform. With its own data centers, proprietary models like Gemini, and a vertical stack from search to cloud to YouTube, Google can monetize AI more efficiently than anyone else. Add in the embedded upside of Waymo's rapid ride-count growth, accelerating Cloud capacity coming online, and disciplined capital returnsincluding buybacks and dividendsand you've got a recipe for multiple expansion. In my view, a move back toward 25x earnings over the next year or two puts a $224 price target within reach, implying more than 30% upside. Of course, investors should watch for high CapEx stressing free cash flow, potential antitrust headwinds, and competition from other AI players. But with marquee investors like Seth Klarman (Trades, Portfolio) and David Tepper (Trades, Portfolio) adding to their stakesand quant shops like Renaissance initiating new positionsI see strong conviction that today's price is a rare entry point. For anyone in search of a long-term AI play with proven execution, I believe Google is one of the best names to own right now. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
