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Globe and Mail
10 hours ago
- Business
- Globe and Mail
2 Buffett-Style Artificial Intelligence (AI) Stocks That Could Build Long-Term Wealth
Warren Buffett has proven his ability to deliver market-beating gains, and thanks to this, build wealth over the years. The billionaire investor, at the helm of Berkshire Hathaway, posted a 19.9% compounded annual increase over nearly 60 years -- and that's as the S&P 500 index recorded a 10.4% such gain. All of this helped his portfolio reach $258 billion as of the closing of the most recent quarter. Though Buffett's biggest holding is Apple, the billionaire generally doesn't invest in technology stocks, so you might not think of turning to this top investor for inspiration when shopping for artificial intelligence (AI) players. But here's some good news: We actually can use some of Buffett's investing principles to identify smart buys in any industry. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » Here, I'll consider two elements that consistently drive Buffett's investment decisions, and these are valuation and competitive advantage. He aims to get in on stocks at a cheap or reasonable level, and he favors stocks that have what it takes to stay ahead of rivals over time. Let's check out two Buffett-style AI stocks that are winning in both of these areas -- and could build long-term wealth. 1. Alphabet Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is a company that you probably have some interaction with on a daily basis. The company owns Google Search, the world's most popular search engine with about 90% market share -- and this business has driven Alphabet's revenue and net income into the billions of dollars. This is the result of advertisers paying to promote their products and services across the Google platform in order to reach us. This search business has a solid moat, or competitive advantage, thanks to its performance and position as part of our daily routine -- when we don't know something, we don't just search for it, we "Google it." So, as long as Google Search continues to offer us the performance we expect, it's likely to maintain its leadership. And here's how Alphabet is ensuring that happens: The company has invested heavily in AI, even developing its own large language model (LLM), Gemini, to improve and expand the capabilities of Google Search. This should please users, and as a result, keep advertisers coming back and potentially even spending more. On top of this, the AI investment is helping Alphabet's Google Cloud business deliver double-digit revenue gains quarter after quarter. Google Cloud sells various AI products and services to customers, and demand is high as the AI boom continues. Along with this solid competitive advantage, Alphabet offers a valuation that might even please the bargain-hunting Buffett. Alphabet, trading for 18x forward earnings estimates, is the cheapest of the Magnificent Seven tech stocks by this measure. 2. Nvidia Nvidia (NASDAQ: NVDA) is clearly on every AI investor's radar screen. The company dominates the AI chip market, and this has helped it generate soaring earnings over the past few years -- with revenue and profit reaching record levels. But this stock doesn't look like it's in a bubble ready to burst. The company's solid reputation for excellence, along with its commitment to innovation, represents a moat. Nvidia aims to launch new AI chip updates on an annual basis, offering rivals little room to jump ahead. And here's something else Buffett would like: the quality of Nvidia's leadership. Jensen Huang founded Nvidia more than 30 years ago and has successfully guided the company ever since. He's known for his resourcefulness, rapidly finding solutions to problems, and commitment to keeping Nvidia ahead of the pack. Strong management is crucial for a company's long-term success, and Buffett has recognized the importance of this to him. "When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever," he wrote in his 1988 letter to shareholders. Now, let's look at valuation. Nvidia isn't the cheapest AI stock around, but after recent declines across the sector, valuation has come down -- and today, it's at a very reasonable level considering the company's AI prospects. The stock trades for 31x forward earnings estimates, down from 50x earlier this year. So, right now, Nvidia's moat, leadership, and reasonable price make it a Buffett-style stock that could help investors build significant wealth over the long term. Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor 's total average return is979% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 2, 2025
Globe and Mail
11 hours ago
- Business
- Globe and Mail
2 Dirt Cheap AI Stocks to Buy in June
"Dirt cheap" and artificial intelligence (AI) aren't typically mentioned in the same sentence. There's a preconceived notion that many of the AI stocks in the market are quite expensive, which is, for the most part, a fair assessment. However, there are still plenty of dirt cheap stocks that look like screaming buys in the AI space. Two of them are Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Adobe (NASDAQ: ADBE), and each looks like an incredible buy right now. Why are these two dirt cheap? I consider both of these stocks cheap because they meet two criteria. First, both stocks are cheaper than the broader market, as measured by the S&P 500 (SNPINDEX: ^GSPC). The S&P 500 has a forward price-to-earnings (P/E) ratio of 22.1, and both stocks are currently cheaper than that mark. GOOGL PE Ratio (Forward) data by YCharts. PE Ratio = price-to-earnings ratio. Furthermore, both stocks have rarely been this cheap, which is another sign for investors that now may be an excellent time to scoop up shares. My second factor for determining whether a stock is dirt cheap is its ability to grow earnings per share (EPS) faster than the market. If a stock is cheaper than the broader market, yet growing more slowly, there is a good reason why it's priced below the market. Both companies are projected to post strong earnings growth over the next two years, exceeding the S&P 500's usual 10% growth rate. Company 2025 EPS Growth Projections 2026 EPS Growth Projections Alphabet 19% 6% Adobe 11% 12% Data source: Yahoo! Finance. EPS = earnings per share. However, I believe these analyst projections are flawed, as they don't account for both companies having massive stock buyback plans. With both companies having record-low stock prices, don't be surprised if they increase their share buyback amounts. A cheaper stock makes these buybacks more effective and can cause the share count to fall quickly, which boosts EPS. Both stocks look cheap, yet they have growth that should make them premium to the market. So, why is the market valuing them in this way? The market assumes both companies are victims of the AI trend Both Alphabet and Adobe's primary businesses are at risk of being disrupted by AI. Alphabet's primary business is Google Search, and there has been no shortage of predictions about replacing traditional search with AI. However, Google has already introduced AI search overviews and released an AI search mode. Both options may bridge the gap and keep Alphabet in the leadership position. Furthermore, generative AI has been around for nearly three years, and Google Search's revenue still rose by 10% in the previous quarter. So, clearly, it isn't dead yet. Adobe is in a similar boat. Its suite of graphic design products has become the industry standard and is used worldwide. However, investors are worried that generative AI image generation could make Adobe's software obsolete. While this may produce some headwinds, Adobe has already launched its incredibly popular Firefly AI, which allows its users to generate images and easily modify existing designs. Furthermore, generative AI tools don't offer the same level of control that Adobe's software provides, and graphic designers aren't willing to give up full creative control to a randomly generated image. While both companies will encounter some headwinds popping up from time to time as a result of generative AI, these are mostly headline-induced worries. The actual businesses are doing just fine. Their consistent execution, combined with a cheap stock price, gives me confidence in their long-term ability to provide market-beating returns, which is why I think these two are excellent buys now. Should you invest $1,000 in Alphabet right now? Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor 's total average return is979% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of June 2, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Adobe and Alphabet. The Motley Fool has positions in and recommends Adobe and Alphabet. The Motley Fool has a disclosure policy.
Yahoo
2 days ago
- Business
- Yahoo
Palantir vs. Alphabet Stock: Wall Street Says Buy One and Sell the Other
Both Palantir and Alphabet stock have shown strong price appreciation since the 2022 bear market. Both companies benefit from growing spending on AI as its use cases expand. Palantir and Alphabet's valuations have moved in opposite directions. 10 stocks we like better than Palantir Technologies › Artificial intelligence (AI) has been the driving force behind the stock market's gains since the bottom of the recent bear market in October 2022. Breakthroughs in generative AI's capabilities created a lot of excitement about the potential of new uses for AI within businesses. Palantir Technologies (NASDAQ: PLTR) found immense value in using AI within its data mining software and has rapidly grown the number of customers using it. That resulted in strong operating results and a soaring stock price. Meanwhile, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) benefited from increased investment in AI development through its Google Cloud platform while strategically integrating generative AI into its core search product. Investors rewarded the stock, nearly doubling its value since the start of 2023. But past performance isn't an indicator of future results, as the saying goes. And Wall Street analysts only expect one of these stocks to keep climbing higher over the next 12 months. Palantir has a median price target of $100, based on the views of 28 analysts who follow the company. That suggests a 20% downside over the next 12 months. Just six of those analysts have given the stock an overweight or buy rating. Alphabet has a median price target of $200, based on the views of 71 analysts following it. That suggests 16% upside over the next 12 months. Of those analysts, 60 rate the stock as overweight or buy. Here's what investors need to know. Palantir's introduction of its Artificial Intelligence Platform (AIP) helped supercharge its growth, especially among U.S. corporations. AIP makes Palantir's software more accessible to non-technical users, expanding its use cases within an enterprise. As a result, Palantir's U.S. commercial revenue rose by 54% in 2024. It topped 70% year-over-year growth in 2025's first quarter. As a software company, Palantir exhibits extremely strong operating leverage. With its rapid revenue growth, fueled by U.S. corporations, its adjusted operating margin expanded to 44% in Q1 2025. That was up from 24% in the first quarter of 2023. Its growth isn't expected to slow down anytime soon. Management increased its guidance for 2025 alongside its first-quarter earnings release. It now expects revenue growth of 36%, and to maintain that 44% operating margin for the full year. But here's the problem for Palantir stock: Its valuation of more than 75 times management's expected sales is extremely high. On an enterprise-value-to-EBITDA basis, the stock trades at more than 160 times forward estimates. No other enterprise software company has a valuation that's even close to that multiple. Taking a long-term outlook for the business suggests the stock could produce lower-than-average returns for investors even if it continues to produce extremely strong financial results. Wall Street seems to be thinking the stock will face a reset at some point in the near future. Such a dip could provide a buying opportunity for investors. But right now, Palantir stock is too expensive to recommend buying. Alphabet stock has come under pressure over the last few months as the company faces regulatory challenges and a court ruling that it has been acting as an illegal monopoly in the search engine technology space. As a result, it may be required to divest itself of certain assets, including its Chrome browser. Compounding that pressure is a report from Apple's Eddy Cue in early May that searches in its Safari browser are down due to increased use of AI chatbots like ChatGPT. Alphabet pays Apple roughly $20 billion a year for the right to be the default search engine in Safari (a practice the Department of Justice and the judge in the antitrust case took issue with), and it has derived a lot of value from its position in the Apple ecosystem. But Alphabet's financial results show another story. Google Search revenue increased 10% year over year in the first quarter. That growth was fueled by Google's integration of new AI features into its core search product. Most notably, AI Overviews, which offer AI-generated answers to search queries alongside links to their sources. Management said the feature increases engagement and user satisfaction, and it's now monetizing search results with AI Overviews at the same rate as those without it. That has led to higher overall revenue. Other AI features include Google Lens and Circle to Search, which help produce more high-value product searches. But Alphabet is more than just a search engine. It also owns YouTube, which grew its revenue by 10% in the first quarter. Its Waymo business is seeing strong momentum as it expands its autonomous vehicle ride-hailing service to new cities. It now completes over 250,000 rides per week. Perhaps the biggest growth driver for Alphabet is its Google Cloud business. It has been a big beneficiary of the growing spending on developing AI, and Alphabet has been working to expand its data center capacity as quickly as possible. Its 28% year-over-year revenue growth in the first quarter belies the true increase in demand for its compute services. That's evident from its operating margin expansion of 8.4 percentage points to 17.8%. Based on how Alphabet's larger competitors in the cloud infrastructure space are faring, Google Cloud could enjoy a lot more operating leverage as it scales up further. All of the uncertainty surrounding Alphabet's future, though, has pushed its valuation down to just 18.2 times forward earnings estimates. That's a great price for a company with a massive cash-flow-generating business like Google Search, a fast-growing cloud computing business, and a massive lead in the burgeoning autonomous vehicle space. It's no wonder Wall Street analysts expect the stock to climb, despite the regulatory challenges the company is facing. Before you buy stock in Palantir Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Palantir Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $828,224!* Now, it's worth noting Stock Advisor's total average return is 979% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Levy has positions in Alphabet and Apple. The Motley Fool has positions in and recommends Alphabet, Apple, and Palantir Technologies. The Motley Fool has a disclosure policy. Palantir vs. Alphabet Stock: Wall Street Says Buy One and Sell the Other was originally published by The Motley Fool
Globe and Mail
4 days ago
- Business
- Globe and Mail
4 Reasons to Buy Alphabet Stock Like There's No Tomorrow
One stock that divides many investors at this time is Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG). A big reason some investors are bearish on the name is that they believe artificial intelligence (AI) will disrupt its highly profitable search business. While certainly a risk, I don't think that is going to happen. Let's look at four reasons why I'm bullish on the stock to the point where I would recommend buying it like there is no tomorrow. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More » 1. Alphabet has search advantages and opportunities AI is potentially one of the biggest technological advancements of our generation. However, while it is very good at many things, there is good reason to believe that AI chatbots won't replace search. Cost is one main issue. Running AI queries is much more costly than search queries, which is why there are often limits placed on the number of queries someone can run, and paid tiers. Investors recently got a peek into the amount of money that AI search start-up Perplexity AI is losing for trial users and users on its free tier, as the company spends heavily on third-party AI models and cloud c omputing services. Meanwhile, OpenAI said that it loses money on its $200-per-month ChatGPT Pro plan. In addition, there will continue to be a large number of people who will not spend money on AI and prefer free, ad-supported search. And when it comes to ad-supported search, whether it be powered by AI or regular search, Google has established a wide moat through its distribution and ad network advantages. The company's search engine is preinstalled and the default engine for billions of devices. Its Android operating system has about a 70% market share in the smartphone market, while its Chrome browser has a 66% market share. Both use Google as their default search engine. Meanwhile, it has a revenue-sharing deal with Apple to be the default search engine on its devices through Safari, which helps it capture much of the rest of the market. It even has revenue-share deals with other browsers, such as Opera, to be their search engine. At the same time, Alphabet has created one of the largest ad networks on the planet. Early on, the company built up its ability to serve local markets through location-based ad targeting and letting local businesses create free listings to improve their presence on search. Meanwhile, its self-service platform makes it easy for local businesses to run campaigns themselves. With a huge user base, Alphabet can connect advertisers with consumers on everything from a global to a local level. Typically, for a search query to be monetized, there must be some form of commercial intent, which is why Google has historically only displayed ads on about 20% of searches. This also highlights the significance of Alphabet's latest AI-powered search updates. With the launch of its new AI mode, the company added several commerce-focused features aimed at enhancing monetization. One standout is "Shop by AI," which allows users to find products simply by describing them, virtually try on clothes using a photo, and even track prices. Google also introduced generative AI capabilities that can perform tasks like finding the best ticket deals across platforms from sites such as Ticketmaster and StubHub. These innovations could help drive new ad opportunities over time. Between Google's unmatched distribution, massive ad network, strong data advantage, and the growing strength of its Gemini AI model -- not to mention its renewed focus on commerce -- I see AI as more of a long-term opportunity for Alphabet than a threat. 2. Google Cloud is driving Alphabet's growth these days While much of the investor focus has been on Google search, Alphabet's cloud computing unit, Google Cloud, has been a strong growth driver for the company. Cloud computing is a high-fixed-cost business, and Google Cloud has recently gained enough scale to cover its fixed costs, hitting a profitability inflection point. This was seen in its results in the first quarter of 2025, where the unit grew its revenue 28% year over year to $12.3 billion, while its segment operating income soared 142% to $2.2 billion. Google Cloud is seeing momentum as customers use its Gemini foundational models to build and customize their own AI tools, then run those workloads on its infrastructure. Its Vertex AI platform, meanwhile, makes it easier for organizations to build, deploy, and manage models all in one place. At the same time, Google Cloud continues to lean into its strengths in data analytics with tools like BigQuery and its leadership in Kubernetes, which are software packages that bundle apps with everything they need to run. Alphabet is investing heavily in data center infrastructure to keep up with demand, and this should be a strong, growing business in the year ahead. Meanwhile, the company has a cost advantage through the development of its own custom AI chips that consume less power, lowering its cost of ownership over time. 3. Waymo has a first-mover advantage Another big potential growth driver for Alphabet that should not be overlooked is its Waymo robotaxi business. The company has gotten a big first-mover advantage in the U.S. and has started to see rapid growth as it expands to more cities. Meanwhile, it has recently teamed up with Uber Technologies in a few cities to gain access to its large distribution platform and for help with fleet management services, such as cleaning, maintenance, and charging its vehicles. Waymo is now providing over 250,000 paid robotaxi rides per week, and Uber reported that in Austin, Texas, Waymo vehicles were busier than 99% of its human drivers in the city, based on trips per day. As the technology gains traction, it's likely that adoption in new cities will accelerate even faster. Alphabet will still likely need to lower the costs of its technology for this business to become profitable, but it is a huge opportunity. 4. Alphabet currently sports a cheap valuation With investors seemingly unable to see the forest for the trees of late, Alphabet has been left with a very cheap valuation. The stock currently trades at a forward price-to-earnings ratio of 18 times based on analysts' estimates for 2025. For a company with a strong collection of market-leading and emerging growth businesses, that valuation is just too cheap. Alphabet is one of the least expensive megacap tech stocks tied to AI, and this is a great time to pick up shares on the cheap. Should you invest $1,000 in Alphabet right now? Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $638,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $853,108!* Now, it's worth noting Stock Advisor 's total average return is978% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Globe and Mail
4 days ago
- Business
- Globe and Mail
2 Cheap Tech Stocks to Buy Right Now
The list of what I'd consider "cheap" tech stocks has shrunk as the market has recovered over the past few weeks, but there are still some out there that could certainly have that label applied. Two that I think deserve the moniker are Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Adobe (NASDAQ: ADBE). Both of these companies are dominant in their respective industries. Yet investors have already assumed that artificial intelligence will permanently disrupt them, even though they're rolling out their own AI solutions. I think the market has gotten these two stocks wrong, and their current cheap stock prices look like a serious buying opportunity. How cheap are these two? Both companies are mature and producing profits, so we'll use the forward price-to-earnings (P/E) ratio to assess their affordability. Using this measure, both Alphabet and Adobe trade for around or under 20 times forward earnings: GOOGL PE Ratio (Forward) data by YCharts. This is significant because the broader market, as measured by the S&P 500 (SNPINDEX: ^GSPC), trades for 22.1 times forward earnings. This well-established benchmark gives me confidence in labeling these two companies as cheap, as they're still growing at a solid rate despite their price tags. Alphabet Alphabet's primary business is the Google search engine, although it has other successful brands under its umbrella like Google Cloud, YouTube, and the Android operating system. However, investors are most worried about the search business being disrupted. Their assumption is that an AI-powered search alternative will replace Google. Alphabet's executives aren't blind to this notion and have already integrated AI search overviews into Google results; they've become a popular feature. This may be enough to bridge the gap between traditional search and a full-on AI experience, but Wall Street assumes this won't be enough. Last quarter, Google Search revenue rose 10% year over year, so it hasn't lost its edge quite yet. Investors are also focusing on Alphabet's trouble with the federal government for operating two illegal monopolies (one in search and one on its advertising platform). This threat is real, as the Department of Justice has already considered forcing Alphabet to sell certain parts of its business. However, we're a long way away from learning the outcome of this case, as there are multiple appeals processes to go through. With that in mind, I'll set this threat aside, because there's nothing investors can currently do about it. I'd forgive anyone who doesn't want to invest in Alphabet because of the impending government action. However, there's still plenty of growth left in its search business (as demonstrated over the past few years). And despite the market's worst fears, AI hasn't come for Alphabet yet. Adobe Adobe is in a situation similar to Alphabet's, minus the potential for government intervention. Adobe's creative design suite of products is the industry standard in graphics design, and is widely taught at all levels of education. There's a fear that generative AI-created content could replace what Adobe's primary users create. However, this is a far stretch, as AI-generated content can be impressive, but lacks the exact control that a program like Photoshop can provide. Furthermore, Adobe has its own generative AI offerings that allow users to create or modify existing images rapidly. Time will tell if Firefly is enough to fend off some free generative AI alternatives. Still, eventually those free alternatives will need to start charging fees for the resources it takes to run them to create an image. I think Adobe can outlast this initial AI wave and will emerge stronger than ever on the other side of it. In the meantime, Adobe is putting off solid growth for a mature company, with revenue rising 10% year over year in the first quarter. Earnings per share also rose 16% because a one-time acquisition termination fee dampened last year's results. Adobe is still a solid business that delivers excellent results, but the fear that it will be toppled by AI is causing its stock to be beaten down. This is a mistake, as the company is still a dominant player in its industry. Should you invest $1,000 in Alphabet right now? Before you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $651,761!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $826,263!* Now, it's worth noting Stock Advisor 's total average return is978% — a market-crushing outperformance compared to170%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
