We came across a bullish thesis on Alphabet Inc. (NASDAQ:GOOG) on ValueInvestorsClub by cuyler1903. In this article, we will summarize the bulls’ thesis on GOOG. The company’s shares were trading at $190.00 when this thesis was published, vs. the closing price of $170.21 on Feb 28.
The search engine offered by GOOG will continue to remain a market leader and can generate bigger monetization potential with AI capabilities. Its mapping platform Google Maps and video channel YouTube offer a seamless integration with its search engine which none of its competitors have managed to replicate. Even with a large user base, the headroom for growth is evident due to a lack of competition in this space.
GOOG’s AlphaFold 3, an AI system capable of predicting protein structure with accuracy, is underestimated in its capability to revolutionize the drug industry. Partnerships with Eli Lilly and Novartis have already been initialized with AlphaFold expected to expedite drug discovery with a high degree of accuracy.
GOOG is yet to monetize Android, with Microsoft receiving $25-50 for each Windows device. There are 3 billion Android devices currently, with 1.5 billion units sold annually. Even if an estimated $10-30 is charged, GOOG can generate annual revenues of $15-45 billion. Even YouTube commands a monopoly in mobile video consumption with a potential trillion-dollar-plus valuation on a standalone basis.
Waymo, the autonomous driving arm of GOOG has a first-mover advantage with access to real driving data that could give it an edge over Tesla. The use cases include autonomous trucking, ride services and licensing fees. This segment could be worth a trillion dollars once the regulatory environment stabilizes with autonomous driving becoming a more viable transportation option.
GOOG is also in the developing stage of creating an artificial general intelligence (AGI) application that has the potential to transform multiple industries. While it is still early to comment on the valuation, this technology can shape markets that are worth trillions of dollars. GOOG’s access to mega computing infra and exceptional talent would enable it to be a forerunner in this space.
Summing up the potential valuation of each segment, GOOG can become the first $10 trillion company, offering multi-bagger returns to the tune of 4-5x.
While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
Hedge Fund Resource Center