Alphabet

Earnings season is upon us, and it’s possible that some stocks could make some large movements following their quarterly announcements. One that I’ve got my eye on that has significant momentum is Alphabet (GOOG 0.86%) (GOOGL 0.82%). Since reporting Q2 earnings on July 23, Alphabet has received several positive developments, including a judge’s decision not to seek a breakup of Alphabet’s core business.

The good news sent shares soaring, with the stock up over 30% since reporting Q2 earnings. That’s a monstrous move for a large company like Alphabet (it’s currently the fourth-largest company in the world and recently crossed the $3 trillion valuation mark for the first time), but can it continue?

I think management’s Q3 outlook could be another catalyst for the stock to go higher, and buying it before it reports earnings on Oct. 29 is a smart move.

1. Persistent advertising growth

Throughout most of 2025, the consensus is that Alphabet’s primary property, the Google Search engine, was in trouble. Everyone was worried about how it would fare against generative AI competition, but it turns out it will be just fine. Google’s revenue growth has been resilient even in the face of rising competition from generative AI models, with its revenue growing at a 12% pace in Q2.

Part of the reason for this growth is that Google has incorporated AI search overviews into every Google search. This results in a hybrid search experience, combining traditional search with a generative AI-powered one. Management also commented that the AI search overview has about the same monetization as a standard search, so it’s not losing any money on this switch either.

If Alphabet reports growing Google Search revenue during this quarter, it will confirm that Google is continuing to excel even when everyone assumed that it couldn’t. With Alphabet’s core business doing well, I think it makes the stock a great buy.

2. Rising cloud computing demand

Another exciting area for Alphabet is its cloud computing division, Google Cloud. Cloud computing is one of the fastest-growing industries around, and is benefiting from a general migration to the cloud alongside rising AI demand. Google Cloud has become a great partner in this realm and has won business from OpenAI (the makers of ChatGPT) and Meta Platforms (META 0.82%).

While Google Cloud isn’t as large as some of its competitors, it’s growing at a healthy rate, with revenue rising 32% year over year in Q2. It’s also dramatically improving its operating margin, increasing from 11% last year to 21% this year. Investors are going to want to see this trend continue, and if it does, the stock could respond positively as a result.

3. Alphabet has a reasonable valuation

Lastly, Alphabet is still valued at a discount to its peers. Despite having an impressive run over the past few months, Alphabet still trades at a discount to all of its big tech peers from a forward price-to-earnings (P/E) standpoint.

AMZN PE Ratio (Forward) data by YCharts

However, after its monstrous run, it’s extremely close to swapping places with Meta Platforms. Still, Alphabet is trading at a discount to others like Microsoft (MSFT 0.50%) and Apple (AAPL 2.04%). If all companies had an equal valuation, Alphabet would actually be the world’s largest because it generates the most net income out of all of them.

AMZN Net Income (TTM) data by YCharts

However, that’s not the way the stock market works, but it does give Alphabet an edge in future investments, as it has significant cash flows that it can buy back stock with, invest in AI, or potentially acquire a business.

Regardless, Alphabet is a highly profitable business with a reasonable valuation that’s growing at a healthy pace. I still think there’s plenty of room for the stock to run, and another catalyst could arrive when it reports earnings on Oct. 29. By buying now, investors can ensure that they get in on a potential pop following the earnings announcement.

Shares of Alphabet (GOOG 0.85%) climbed 14% higher in September, according to data from S&P Global Market Intelligence. The parent company of Google, YouTube, and Google Cloud was helped by an antitrust ruling and new artificial intelligence (AI) services it launched last month. As one of the megacap technology stocks, Alphabet stock is up close to 50% in the last year and increasingly seen as a winner in the AI boom.

Here’s why the stock climbed to new all-time highs yet again in September.

New AI tools and an antitrust ruling

In early September, Alphabet received an update on its antitrust case with Google Search. A judge gave out remedies for the company after determining it was a monopoly in the search engine space. However, with the rise of new AI tools like ChatGPT, the judge’s remedies were not harsh on Google, allowing it to keep its Google Chrome browser and Android operating system under the same corporate umbrella. Alphabet shares jumped on the news that its ecosystem of consumer internet services was not going to be broken up.

In other news, Alphabet released a new image generator called “Nano Banana” through its Gemini AI tool. The image creator has gone viral, sending the Gemini App to the top of the App Store rankings, surpassing ChatGPT in the process. This trend indicates that Alphabet is catching up to ChatGPT in customer usage, leading the way in consumer AI innovations.

App Store rankings will not directly impact Alphabet’s revenue, but it should stem the tide of users adopting ChatGPT en masse compared to Alphabet products. In recent years, some investors have left Alphabet for dead because of fears over ChatGPT usage. Now, those fears may be proving to be overblown.

Image source: Getty Images.

Is Alphabet stock a buy?

Alphabet stock had a lot of risks eliminated last month, both from antitrust court cases and its competition in AI. Now, the stock is closing in on a market cap of around $3 trillion.

Despite its soaring stock price, Alphabet does not look overly expensive right now. Its price-to-earnings ratio (P/E) sits at 26, which is lower than most of the AI technology players, even though Alphabet has all the tools and assets to dominate the AI race. It has the best data (Google Search, YouTube, Gmail) to train on and top-of-the-line infrastructure through its Google Cloud division.

The stock may be soaring to all-time highs, but don’t think you’ve missed the boat in owning shares of Alphabet. Buy this stock and hold on for the long haul.

Ken Griffin, the billionaire hedge fund manager and CEO of Citadel, recently turned heads after making a striking observation about Alphabet (GOOG 0.21%) (GOOGL 0.28%). During an interview at Stanford Business School, Griffin proclaimed that Alphabet wields comparable levels of computational power as the fifth-largest country in the world.

This is not mere hyperbole. Griffin’s remark underscores the vast scale of Alphabet’s technological infrastructure and its dominance in shaping the artificial intelligence (AI) revolution.

For investors, this comment is more significant than a memorable sound bite. It highlights Alphabet’s role at the center of AI’s growth, where demand for compute power and data processing is only accelerating.

Ken Griffin just made a bold statement about Google

When most people think of Alphabet, Google Search and YouTube are usually the first properties that come to mind. But the company’s influence stretches far beyond the internet.

Today, Alphabet operates across a diverse set of industries — ranging from cybersecurity through its investment in Wiz, to cloud computing with Google Cloud Platform, consumer electronics with Android, autonomous driving via Waymo, and even custom AI hardware with its tensor processing units (TPUs). In effect, Alphabet has quietly engineered one of the most powerful computing backbones in the world.

By comparing Alphabet’s resources to those of a nation, Griffin underscores the staggering scale of its capabilities in processing, storage, and advanced data workloads. For perspective, the world’s fifth-largest country in terms of electricity consumption falls between Japan and Russia — industrialized economies that power hundreds of millions of people.

If a single company like Alphabet commands that level of computational power, it signals just how central the company has become to the global digital economy.

Image source: Getty Images.

Alphabet is purpose-built for the AI infrastructure era

At the heart of Alphabet’s AI strategy is TensorFlow, its open-source framework for machine learning. TensorFlow is more than a toolkit — it’s an ecosystem powering advanced applications in natural language processing (NLP), robotics, computer vision, and more.

Griffin’s observation ties directly to this computational muscle: Alphabet’s vast infrastructure is the foundation for training and deploying AI models, at a scale few rivals can match. This isn’t simply about producing isolated AI-powered products — it’s about providing the tools, frameworks, and cloud infrastructure that enable developers, enterprises, and entire global communities to innovate.

That network effect is what strengthens Alphabet’s competitive moat. Just as Google Search became the default gateway to the internet two decades ago, Alphabet’s AI backbone is positioning the company as an enduring platform on which the next era of computing is built.

The impact on investors

Griffin’s comment underscores why Alphabet should no longer be seen merely as a cyclical play on digital advertising. Viewed through the lens of AI, Alphabet emerges as a long-term compounder — an essential force powering the AI economy. For investors, the takeaway is clear. Griffin’s perspective shines light on Alphabet’s deeply entrenched position across various corners of the AI landscape.

The company’s ability to marshal computational power on par with a nation highlights not only the durability of its entire business, but stresses the importance of its competitive advantages across both hardware and software — domains with enormous capital requirements and high barriers to entry.

GOOGL PE Ratio (Forward) data by YCharts

Yet despite its technological leadership, the stock continues to trade at a steep discount relative to other megacap tech peers based on forward earnings multiples.

This disconnect suggests that the broader market has yet to fully price in Griffin’s astute insight — leaving long-term investors with meaningful upside potential as Alphabet’s position in the high ground becomes even more pronounced, while rivals scramble to keep pace.

Ever since OpenAI introduced ChatGPT to the public a few years ago, some Wall Street analysts have sounded the alarm for Alphabet (GOOGL -1.02%) (GOOG -0.96%). The concern is straightforward: As consumers increasingly turn to chatbots to answer queries, Alphabet’s long-standing dominance in Google Search could face disruption.

Since the bulk of the company’s revenue comes from advertising fees tied to search, any erosion in Google’s market share seemingly poses an existential threat to Alphabet’s financial engine. On the surface, this bearish narrative is compelling. But the reality is far more nuanced.

Alphabet’s financial resilience, strategic partnerships, and product evolution suggests that the company is not only prepared to defend its turf but may also emerge stronger in the face of rising competition.

Analyzing Alphabet’s financial fortress

In the table below, I’ve summarized Alphabet’s advertising revenue from Google Search over the past year:

Data source: Alphabet. YOY = year over year.

Given the profile above, there is little evidence that ChatGPT or other large language models (LLMs) represent material headwinds for Google’s dominance across the internet. The figures above suggest that advertisers continue to view Google as one of the most effective channels for capturing engagement and attention online.

What’s even more critical to recognize is that Alphabet’s advertising business operates at exceptionally high profit margins. This profitability provides the company with a powerful buffer. What I mean by that is if LLMs eventually chip away at Google’s market share, Alphabet is still well-positioned to absorb the impact by reinvesting this cash flow into next-generation products — a strategy the company is already executing today.

In recent years, Alphabet has poured significant resources into expanding its cloud infrastructure platform to better compete with Microsoft Azure and Amazon Web Services (AWS). At the heart of Google Cloud Platform (GCP) is its custom-built hardware, Tensor Processing Units (TPUs). These are specialized chips designed to handle advanced artificial intelligence (AI) workloads such as machine learning and deep learning.

In a striking development, OpenAI signed on as a major GCP client. The irony here is hard to dismiss: Even if ChatGPT diverts some internet traffic that might otherwise flow to Google, Alphabet still benefits financially on the back end by powering the very company allegedly threatening its leadership position.

Image source: Getty Images.

Turning Google into an LLM

Alphabet’s defensive posture extends well beyond monetization. The company has also integrated its own AI model, Gemini, across its ecosystem.

Within Google Search, users can now toggle into “AI Mode” — effectively transforming the search experience into an LLM-powered interface. By embedding a ChatGPT-like experience natively into Google, the company layers its own generative AI capabilities into the familiar query box.

This approach delivers two major advantages. First, it preserves ingrained user habits — making switching to other platforms less appealing. Second, it allows Alphabet to maintain robust advertising economics — albeit in a reimagined format.

Together, these moves underscore a dual positioning: defending the core search business while simultaneously profiting from the very companies seeking disruption. Put differently, Alphabet isn’t treating LLMs as a binary threat. Instead, the company has created a hedge that few can match — making money whether users type a query into Google or send a prompt to ChatGPT.

Is now a good time to buy Alphabet stock?

While OpenAI currently commands much of the cultural and technological AI spotlight, Alphabet’s response is more than simple defensive insulation. The company is actively reshaping its narrative — repositioning itself as a business woven together by AI-powered services.

GOOGL PE Ratio (Forward) data by YCharts

The valuation expansion outlined above suggests that investors are now just beginning to recognize the breadth of Alphabet’s AI story. Yet, based on forward earnings, the market has not assigned the same premium to Alphabet as other beneficiaries of the AI revolution.

Alphabet may not have declared a “checkmate” against OpenAI, but it has clearly moved past a stalemate. With its shares trading at a steep discount to its peers, I see Alphabet stock as a compelling opportunity as the company’s AI investments continue to bear fruit.

Quantum computing is emerging as the next big investment trend, although we’re still a few years out from seeing commercially viable quantum computing. As a result, investors are wondering what the best approach to quantum computing is.

There are publicly traded quantum computing investments, like IonQ (IONQ 5.39%), that have massive upside if they work out. However, they also come with big risks if their technology isn’t adopted. Multiple big tech companies are also involved in the quantum computing arms race, like Alphabet (GOOG 1.27%) (GOOGL 1.23%). These companies have nearly unlimited resources compared to the start-ups, but don’t have near the upside. This makes them safer picks, but investors might be worried they’re leaving too much potential on the table by not taking some risk.

So, between the two, which is the best quantum computing investment right now?

Image source: Getty Images.

Investors must pay a premium for IonQ

There is a significant size difference between the two companies. Alphabet is a tech behemoth with a market cap of $2.9 trillion, while IonQ is a comparatively small $17 billion company. However, despite Alphabet’s size, the stock is far cheaper than IonQ. Let me explain.

Currently, IonQ isn’t making a ton of money. It’s relying on various research partnerships and contracts that it has signed to generate revenue. In Q2, it recognized revenue of $21 million, which is a rounding error compared to Alphabet’s results. Alphabet generated $96.4 billion in revenue during Q2, making IonQ’s revenue 0.0218% of Alphabet’s total. That’s a huge difference.

With Alphabet, you’re paying about 8 times sales for the stock, or for every dollar of sales over 12 months, you’re paying $8. IonQ trades for 242 times sales, so it’s quite a bit more expensive.

GOOG PS Ratio data by YCharts

This mismatch is because the market is far more excited about IonQ’s future than Alphabet’s. Should both companies develop commercially relevant quantum computing systems, the effect it will have on each company’s growth is quite different. For Alphabet, it will likely contribute a few extra percentage points each quarter. For IonQ, a major system sale could cause its revenue to double or triple year over year. That explosive growth is what excites investors the most with IonQ, although it’s far from guaranteed.

Buying both stocks allows investors to balance risk

There’s no guarantee that the approach Alphabet or IonQ is taking will be a winning one. There may be a hidden flaw in each company’s design that doesn’t appear for a few years, which could eliminate them from contention in the quantum computing arms race.

While this would be disappointing for Alphabet, it wouldn’t be the end of the world. It would continue down its path of AI dominance and also thrive on the advertising revenue generated by the Google search engine.

Unfortunately, if this happens to IonQ, the stock would likely go to $0, losing investors a ton of money. This scenario is probably more likely for IonQ than quantum computing success, and investors must be aware of this risk.

So, which one is the better buy? I’d say if you’re afraid of a stock going to zero, then IonQ is one to avoid, and Alphabet is more attractive. However, I think there’s a better approach. By devoting no more than 1% of your portfolio positioning to a quantum computing long shot like IonQ, you can capture some of the upside if it makes it big while limiting downside risk. Additionally, by purchasing shares of Alphabet to balance this risk out, investors can get two impressive quantum computing plays. This basket approach is a smart way to invest in an emerging field like quantum computing, as it balances out risk by investing in multiple companies.

Two of the world’s largest companies are Apple (AAPL 1.82%) and Alphabet (GOOG 0.27%) (GOOGL 0.22%). These two companies are currently the third and fourth largest in the world by market cap, so neither is likely to provide market-crushing returns. As a result, investors need to determine if either of them can outperform the market over the long term; otherwise, they aren’t worth owning.

I believe there is a clear better buy between the two right now, and this stock could easily outperform the market over the next five years, while the other may struggle to do so. Which one is it? The answer may surprise you.

Image source: Getty Images.

Both businesses want to maintain the status quo

Both Apple and Alphabet have some of the most recognizable brands on the planet. Apple’s ecosystem is centered around the iPhone, with accessories and laptops to create a leading consumer technology brand. Alphabet is the parent company of many businesses, but its most notable brand is Google. Google is how the vast majority of people access the right content on the internet, although that notion is under distress.

Many investors believe that generative AI could replace Google, although that remains to be seen. Google remains the top search engine used by many, and with its recent integration of AI search overviews, it has also evolved to adapt to this AI-centric view.

Additionally, Alphabet recently won a court case that allowed it to stay in its current state and continue paying Apple for the right to be the default search engine on its iPhones. This helps ensure Alphabet’s status quo is maintained, and is an extremely positive sign for investors.

Apple is thriving on the status quo, as it hasn’t really released a new feature or technology in recent years. That may change at its next release event, but investors will need to see what the market demand is for anything that Apple releases, as it could be a flop.

At their core, Alphabet and Apple are two businesses that want to maintain the status quo while expanding when possible. This doesn’t really distinguish either of them from the other, so we’ll need to examine their finances to determine the true best buy.

Winner: Tie

Alphabet is putting up better growth figures

Since 2023, Apple’s growth has been practically nonexistent. That changed in Q3 FY2025 (ending June 28), when it delivered 10% revenue growth and 12% diluted earnings per share (EPS) growth.

AAPL Revenue (Quarterly YoY Growth) data by YCharts

Still, that pales in comparison to Alphabet’s growth, which has been far stronger for much longer. In Q2, Alphabet’s revenue rose by 14% and diluted EPS increased by 22%. That continues a long-standing streak of Alphabet outperforming Apple from this standpoint, and I wouldn’t be surprised to see that pattern continue.

GOOGL Revenue (Quarterly YoY Growth) data by YCharts

Alphabet’s faster growth stems from some of its other divisions, such as Google Cloud and Waymo. Both of these have massive upside and provide growth wings that Apple can’t match.

As a result, I think it’s fairly clear that Alphabet has far better growth than Apple.

Winner: Alphabet

Alphabet’s stock is far cheaper

Valuation is another important consideration, as it’s possible that the slower-growing company can be the better investment if it’s priced cheap enough. However, that’s not the case here. Apple’s stock is significantly more expensive than Alphabet’s, despite the latter’s much slower growth.

AAPL PE Ratio data by YCharts

Although they used to trade at a similar price-to-earnings (P/E) price tag, a significant gap has opened up since mid-2024. However, after reviewing the growth charts from above, it’s clear that Alphabet has grown much faster than Apple during this time frame.

As a result, Apple’s stock has become far more expensive than it normally is, while Alphabet is just returning to its usual valuation range. This makes Alphabet a far better buy considering its growth.

Winner: Alphabet

Both Class A and C shares of Alphabet (GOOG 8.59%) (GOOGL 8.34%) popped about 8.4%, as of 10:48 a.m. ET today, after a federal judge ruled that the conglomerate will not have to divest its massive Chrome search business.

A big win for big tech

In 2023, the U.S. Department of Justice filed a landmark lawsuit against Google for monopolistic practices in the search engine space, specifically related to its digital advertising practices. Last year, a federal judge sided with the DOJ and found that Google had run an illegal monopoly. The DOJ then requested that a judge require Google to divest its Chrome browser, a big driver of the company’s search business that makes up more than half of the company’s total revenue.

Image source: Getty Images.

While many believed this was unlikely to happen, U.S. District Judge Amit Mehta made it official yesterday, ruling that Google will not have to divest Chrome. Furthermore, Google can keep paying large partners like Apple to feature it as the default search engine on web browsers like Safari. However, Mehta also ruled that Google cannot propose exclusive contracts that prevent competitors from being able to fairly compete in the space. Google will also have to share some data that will supposedly help competitors get on more of an even playing field.

“This is a monster win for Cupertino and for Google its a home run ruling that removes a huge overhang on the stock,” Wedbush’s Global Head of Tech Research Dan Ives in a recent research note, according to CNBC.

A catalyst for the cheapest Mag Seven name

This year, Alphabet has traded at the cheapest valuation in the “Magnificent Seven,” largely due to the DOJ’s lawsuit and other issues with the search business including how artificial intelligence chatbots might disrupt the business.

But within the massive tech conglomerate are several incredibly fast-growing and strong businesses like Waymo, YouTube, Google Cloud, and even a chip business. Even after the nice move today, investors can still buy the stock.

The stocks of Google parent Alphabet (GOOGL 3.10%) (GOOG 2.98%) and Meta Platforms (META 2.04%) shot higher in Friday trading. Although most stocks rose because the Federal Reserve strongly hinted at a September cut in interest rates, another factor was likely the announcement of Meta’s cloud deal with Google, as reported by The Information.

Considering the $10 billion size of the deal, one has to assume it is critical, particularly to Alphabet. Still, considering the state of the artificial intelligence (AI) stock, it could serve as a much-needed catalyst for the company’s investors. Here’s why.

Image source: Getty Images.

Terms of the partnership

Under the terms of the deal, Meta will pay Google $10 billion over six years. In exchange, it will receive access to Google Cloud’s storage, server, and networking services, along with other products.

Meta has previously relied on Amazon‘s Amazon Web Services (AWS) and Microsoft‘s Azure for such services. The deal does not necessarily mean it will deal less with these companies. More likely, it speaks to Meta’s insatiable demand for cloud infrastructure as it seeks to become a major player in the AI space.

Additionally, Meta and Alphabet are each other’s largest competitors in the digital advertising market. And in the first half of 2025, 98% of Meta’s revenue came from digital ads. Hence, in a sense, it is remarkable that these two would become partners in a different business.

How it helps Alphabet

However, in another sense, this is a huge step forward for Alphabet’s future. In the first half of this year, Alphabet earned 74% of its revenue from the digital ad market, down from 76% in the same period in 2024. This is also by design, as Alphabet has purchased dozens of businesses unrelated to the digital ad market in its efforts to transition into a more diversified technology enterprise.

So far, Google Cloud is the only one of these enterprises to appear in Alphabet’s financials. It accounted for 14% of Alphabet’s revenue in the first two quarters of 2025, up from 12% in the same year-ago period.

Additionally, Google Cloud generated over $49 billion in revenue over the trailing 12 months, implying the $10 billion from Meta over six years will make up a relatively small portion of Google Cloud’s business.

Nonetheless, the deal serves as a vote of confidence for Alphabet’s cloud business, one that continues to lag AWS and Azure in terms of market share.

Image source: Statista. Y-o-y = year over year.

The investor perspective is also crucial. Over the last year, Alphabet stock has outpaced the total returns of the S&P 500 by a significant but not eye-popping margin. However, it may help that Alphabet’s price-to-earnings (P/E) ratio of 22 is the lowest among “Magnificent Seven” stocks. Hence, the Meta deal could prompt investors to look more favorably upon that earnings multiple.

GOOGL Total Return Level data by YCharts.

Furthermore, if the Meta deal prompts other companies to do more business with Google Cloud, it could provide a boost to its market share and, by extension, Alphabet stock.

The Meta deal and Alphabet stock

Ultimately, Meta’s deal with Google Cloud will more than likely take Alphabet stock a leg higher, but investors should expect the effects to be more indirect. Indeed, the deal is remarkable in that it serves as a boost for third-place Google Cloud and is notable since the two companies are direct competitors in each other’s largest enterprises.

Although $10 billion in added business over six years is substantial, Google Cloud generated $49 billion over the last 12 months. Thus, it is a significant but not game-changing boost to the enterprise.

However, the deal may make Google Cloud more attractive to prospective customers, and the low P/E ratio could attract more investors to Alphabet. In the end, those could become the more significant benefits of the deal.

Billionaire Bill Ackman was busy in the second quarter, investing in two of the world’s largest tech companies. His hedge fund, Pershing Square Capital, started a new position in Amazon (AMZN 3.12%) and boosted its stake in Alphabet (GOOGL 3.10%) (GOOG 2.98%).

Ackman is a well-regarded investor known for running a concentrated portfolio: As of June 30, Pershing Square Capital’s portfolio had only 10 companies in it. So when it makes a big investment, it’s worth it for retail investors to pay attention and consider whether they want to follow.

Amazon

Pershing established a new position in Amazon in the second quarter, picking up 5.8 million shares. That made it the fund’s fifth-largest holding, accounting for 9.3% of its value as of Aug. 14.  

Amazon’s logistics network has always been the backbone of its e-commerce business, and now the company is employing artificial intelligence (AI) and even more robotics than before to make it even more efficient. The company is applying AI to such tasks as optimizing delivery routes, stocking warehouses more effectively, and directing drivers to hard-to-find drop-off locations in places like large apartment complexes.

Meanwhile, the company now has over 1 million robots working in its fulfillment facilities, and they’re being carefully orchestrated by its Deepfleet AI model. Its newer robots can do more than just lift heavy packages. Some can spot damaged goods better than humans (which lowers the number of returns), while some can even repair themselves. All of this saves money and speeds up shipping times.

AI is also strengthening Amazon’s advertising unit. Merchants can use its AI tools to create better product listings and ad campaigns. Advertising is a high-margin business that also has been one of the company’s fastest growing, with revenue up 23% last quarter.

Altogether, AI is helping drive strong operating leverage in Amazon’s e-commerce operations. Last quarter, its North American segment’s revenue rose 8% while its operating income climbed 16%. That kind of leverage is exactly what investors want to see.

Amazon’s cloud computing division, AWS, meanwhile, remains its most profitable segment and its fastest-growing. The company created the cloud infrastructure market and still holds a nearly 30% share of it. AI is now a major driver in that segment, too. Services like Bedrock and SageMaker allow customers to build and run models directly on AWS, while it recently introduced Strands and Agentcore to help customers build AI agents and safely run them in a secure, server-less environment. Meanwhile, the company’s custom-designed AI accelerator chips, Trainium and Inferentia, give it an edge in cost and performance. AWS continues to grow quickly: Revenue climbed 17.5% last quarter to $30.9 billion

Amazon is spending heavily on AI infrastructure, but history shows the company has a knack for winning big when it spends big. Trading at a forward price-to-earnings (P/E) ratio of about 30 based on analysts’ consensus 2026 estimates, the stock still looks appealing, particularly given its growth runway.

Alphabet

Amazon wasn’t the only tech stock Pershing was buying in the second quarter. It also picked up another 925,000 shares of Alphabet’s Class A stock. That increased its total stake in the company (which includes both Class A and Class C shares) by 8.6% to almost 10.8 million shares. Based on the latest public information, that made it the hedge fund’s third-largest holding, accounting for 15% of its value as of Aug 14.

Investors have worried that the growing use of AI chatbots will chip away at Alphabet’s Google Search business, but so far, that hasn’t happened. In fact, last quarter, Google Search’s revenue growth accelerated, increasing by 12% year over year to $54.2 billion. Alphabet has also built AI into its products. More than 2 billion people are already using AI Overviews in Google Search, and its new AI Mode is just starting to gain traction. The company is also using AI to advance its tools beyond simple text queries, with Google Lens and Circle to Search standing out as two prime examples. New commerce-focused tools like Shop by AI should also create new monetization opportunities for the company.

One key aspect of Alphabet’s competitive moat is distribution. Chrome currently controls two-thirds of the browser market, while its Android operating system runs more than 70% of smartphones. That makes Google the first touchpoint to the internet for billions of users. It also gives Alphabet a huge volume of data and search query histories that it can then funnel into its massive ad network.

Cloud computing is another big growth driver for Alphabet. Google Cloud’s revenue jumped by 32% in Q2 while its operating income more than doubled. Customers are drawn to Alphabet’s Gemini models, Vertex AI platform, and its custom-designed tensor processing units (TPUs). These TPUs lower costs for AI workloads and give Google Cloud a cost advantage. The business has finally reached scale and is now showing strong operating leverage.

Image source: Getty Images

Alphabet also has longer-term bets. It’s deploying its Waymo unit’s robotaxis into new cities as the driverless ride-share business shows strong momentum. Meanwhile, with its Willow quantum computing chip, it has made meaningful progress on error-reduction — one of the core challenges in quantum computing technology. These businesses are a long way from being mature, but their upside potential is enormous.

Despite all of this, Alphabet trades at just 19 times analysts’ 2026 earnings estimates. That is cheap for a company that’s an established leader in search, cloud, video streaming, mobile, and AI infrastructure. Among the big AI stocks, Alphabet looks the most attractively valued.

Solid buys

In my view, Amazon and Alphabet look like solid buys for long-term investors. While the stocks aren’t without risks, given their market positioning and current valuations, I think it makes sense to follow Ackman’s lead and own both stocks.