Just How Valuable Is Google's AI?
Some argue that Alphabet is undervalued at current levels, but that doesn't even take into account the tech giant's artificial intelligence assets, which are extremely difficult to separate out and value.
Google shares have risen 16% year-to-date, compared to the S&P 500's 19.1% gain, and Google's forward one-year price-to-earnings multiple is 21.9, far lower than it once was.
But Google, searching for its next driver of meaningful growth, owns various artificial intelligence assets that make the company's operations more efficient, while indirectly driving revenue.
TheStreet's Tech Editor Nelson Wang said "It's kind of hard to overstate just how dominant google is in AI." He noted thtat "all of those services and products that it owns, it enhances the value of Google Search, of YouTube, of Android, so it's really very pervasive and comprehensive." TheStreet's Tech Columnist Tiernan Ray broke down why one can point to Google's AI capabilities as a way of arguing the stock is undervalued: "If you look at the stock, based on a market cap of $840 billion, based on projected revenue, is trading at 5 times forward revenue.
If you took out the cash that Google has, it drops down to 4.5 times.
[4.5 times revenue] is an extremely low multiple and what we're not factoring in is what is the value of all of the assets of all of the technology?
It's an intangible asset of some kind, but it must have some value because it produces things over time." Related: Alphabet Stock Might Be Really Cheap if You Factor in Its AI Leadership Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio.
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