AI Stocks to Consider: A Potential Nvidia-like Gainer in the Artificial Intelligence Sector
In a bold move to lead the next phase of internet interaction, Alphabet, the parent company of Google, has unveiled a comprehensive, multiyear strategy for AI development and implementation. This strategy aims to position Alphabet as a dominant player in both consumer-facing and enterprise sectors.
In the consumer realm, Alphabet is integrating advanced AI, particularly its Gemini 2.5 engine, into its core search product. This transformation results in an AI-powered experience called "AI Mode." As of Q2 2025, AI Mode is available in 200 countries and reaches 1.5 billion monthly users. The innovation enhances search by processing twice the context length of competitors and delivering multimodal, faster answers. This AI-driven search is not just a defensive moat against competitors like OpenAI but also a growth driver, turning search into a potential $108 billion market by 2032. Early results show double-digit growth in sectors like financial services and retail through AI-generated overviews.
In digital advertising, AI is revolutionising how ads are matched and delivered. Alphabet uses AI to better understand user context and intent, enhancing ad performance and expanding the total addressable market. New AI-powered tools like Smart Bidding Exploration extend paid search capabilities, increasing advertiser reach and effectiveness.
Moving into the enterprise sector, Alphabet is aggressively expanding Google Cloud as a platform for AI-powered enterprise solutions. Google Cloud is growing at 28% year-over-year revenue, shifting from a cost centre to a major profit driver. Investments in AI infrastructure, including the Ironwood TPU hardware, reduce training costs by 30%, enhancing scalability and efficiency. The planned acquisition of Wiz, a cybersecurity firm, aims to provide comprehensive AI security solutions, thereby attracting and retaining enterprise customers through integrated, full-stack AI offerings—hardware, software, and security combined.
Alphabet is reallocating significant resources toward AI, increasing capital expenditures from $52.5 billion in 2024 to an estimated $75 billion in 2025. This funding boost prioritizes AI infrastructure and development. Concurrently, the company has initiated voluntary employee buyouts in legacy teams to restructure around an AI-first future, demonstrating a clear strategic pivot rather than mere downsizing.
With its AI strategy, Alphabet is aiming to capitalise on growth in the enterprise niche of the generative AI market. Google Search handles over 90% of all search queries, and over 80% of Alphabet's second-quarter revenue came from digital advertising. Despite a significantly lower bottom-line valuation compared to industry leaders like Nvidia and Amazon, Alphabet presents an attractive alternative for value-conscious investors.
Alphabet's main competitors in the generative AI market are Amazon's AWS and Microsoft's Azure. However, Alphabet's dominant position in the Silicon Valley ecosystem could benefit it tremendously from growth in the generative AI sector. The expansion in AI-related demand could help support Google Cloud's continued success, as over half of venture-backed generative AI start-ups use Google's cloud-computing platform.
Recently, Alphabet has incorporated AI into Google Search, offering optional AI-generated answers to search queries. The AI-generated answers could outcompete ChatGPT due to its wide user base. Alphabet has also launched its Bard chatbot, which is similar to ChatGPT. The monetization potential of Alphabet's consumer-facing AI efforts remains unclear, but it could use the data generated for targeted advertisements and other forms of consumer research.
Google Cloud turned profitable for the first time this year, with the Google Cloud segment generating an operating income of $395 million. The prior-year period saw a loss of $590 million for the Google Cloud segment. This profitability, combined with Alphabet's ambitious AI strategy, positions the company well for the future of AI-driven growth and innovation.
Investing in Alphabet's AI-focused strategy could potentially yield returns, given its integration of AI into finance through enhanced search capabilities in sectors like financial services, doubling digital advertising performance, and expanding AI-driven solutions for enterprises on Google Cloud. Moreover, the company's AI investments in technology, such as artificial intelligence and artificial intelligence infrastructure, could further position it as a contender in the generative AI market.
