1 Hypergrowth AI Stock to Buy Before It Happens

the Nasdaq Composite (NASDAQ: ^IXIC) It’s been a monster for two years. After achieving gains of 43% in 2023, the index achieved gains of about 30% in 2024, representing one of the best performing periods in its history.

Contrary to what your intuition may tell you, this does not mean that the index is ready for a correction in 2025. In fact, the opposite may happen. Going back to 1972, every year with returns of 30% or higher was followed by an average return of 19%, likely due to the momentum factor. While this does not happen Guaranteed Good returns for your portfolio in 2025 It seems likely that the good times will continue, given historical data.

And history suggests the Nasdaq could rise again in 2025. Here’s one artificial intelligence (AI) stock to buy before it goes up.

Nasdaq’s returns over the past two years have been driven by the AI ​​boom. There are a lot of stocks related to artificial intelligence, e.g Nvidiais now trading at multiples of Noseble’s earnings. However, one of them is still undervalued and hiding in plain sight for investors to buy in 2025: alphabet (NASDAQ:GOG) (Nasdaq:Google).

The owner of Google, YouTube and other tech assets has been hobbled by a narrative that it is losing market share to new AI tools like ChatGPT. It is true that ChatGPT has gained great popularity, but it has not come at the expense of Google Search’s profitability. According to third-party estimates, Google Search still has a market share of approximately 90% among search engines worldwide, a share that has not budged much in the past few years.

Google is ingrained in modern digital operating systems and has billions of daily users. Now, the company has an opportunity to bolster its business with new AI products, like new search result summaries, the Gemini chatbot, and Google Lens (which allows you to search for what you see). Google wants to let you search for anything in the world around you and get a thoughtful, AI-powered response. This will open up more opportunities for search queries in everyday life, which will lead to more advertising revenue for the company.

Last quarter, Google’s search revenue rose 12% year over year to $49 billion.

Alphabet has several tools it can leverage to maintain revenue and profit growth. There is the AI ​​boom mentioned above that will help grow Google Search. There’s YouTube, which continues to gain market share in streaming video and increased its revenue by 12% last quarter. Google Cloud is helping Alphabet sell its AI breakthroughs to third parties and increasing revenue by a staggering 35% year over year. At this pace, this sector will reach $100 billion in annual revenue within a few years.

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On top of revenue growth, Alphabet is working to boost its bottom line by expanding operating margin. The operating margin reached 32% in the last quarter compared to 28% in the same period last year. With more scale, operating leverage will continue to impact and help Alphabet grow its earnings power over the next few years.

Finally, Alphabet is a consistent stock repurchaser, with outstanding shares declining 11% in the past five years. Reducing the number of shares helps increase earnings per share (Eps).

The five factors mentioned will help Alphabet double its earnings per share at a double-digit rate over the next five years, and perhaps longer. And what would investors have to pay for this double-digit farmer? As of this writing, the stock is trading at a price-to-earnings (P/E) ratio of 26, which is less than… Standard & Poor’s 500 (SNPINDEX: ^GSPC) The Nasdaq Composite Index is over 30.

The AI ​​boom will help Alphabet grow EPS above the market average, while the stock is trading at a P/E below the market average. This is a great position to enter a position in Alphabet stock. Investors should buy this hyper-growth product and hold it through 2025 and beyond.

Before you buy shares in Alphabet, consider the following:

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Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Brett Schiffer He has positions in the alphabet. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool has Disclosure policy.

History Says the Nasdaq Will Rise in 2025: 1 Super-Growth AI Stock to Buy Before That Happens Originally published by The Motley Fool