Artificial Intelligence, Quantum Computing, and RoboTaxis: One Stock to Consider

Artificial intelligence (AI) stands out as one of the most transformative technologies we have seen in recent times. Some experts argue that even greater advancements lie ahead with quantum computing, while autonomous ride-hailing services, often referred to as "robotaxis," could introduce significant societal changes.

Investing in these emerging fields holds the promise of substantial returns over the next decade. However, you might not need to spread your investments across multiple stocks to capture the benefits of these technologies. Here’s a spotlight on one "Magnificent Seven" stock that encompasses all three areas.

Meeting All the Criteria

Alphabet (GOOG -0.67%) (GOOGL -0.79%) has been at the forefront of AI development for years. Their researchers played a key role in the creation of transformers, which are essential components of today’s large language models (LLMs), such as ChatGPT.

The company continues to hold a strong position in the AI landscape, with its latest model, Google Gemini, recognized as one of the most advanced AI technologies available. Google Cloud provides a diverse array of AI tools catering to various customer needs, and AI is deeply integrated into Alphabet’s products, including Google Search and YouTube.

Unlike classical computers, which operate using bits (0s or 1s), quantum computers utilize qubits (quantum bits) that can represent values of 0, 1, or both at the same time. Furthermore, qubits can be entangled even when they are separated by considerable distances. These unique traits enable quantum computers to process vast amounts of information at much higher speeds compared to their classical counterparts. Alphabet recently unveiled its Willow chip, marking a significant step toward the realization of large-scale, effective quantum computing.

In terms of autonomous services, Alphabet's Waymo unit is a leader in the robotaxi sector. Waymo currently offers driverless ride-hailing services in cities like Los Angeles, Phoenix, and San Francisco, with plans to extend its operations to Austin, Atlanta, and Miami shortly.

While there have been some notable issues with Waymo’s service—such as a case where a robotaxi was seen driving in circles in a parking lot—its self-driving technology is generally reliable and continues to advance. Investors should view Waymo’s growth potential as a compelling factor for Alphabet in the years to come.

Exceptional on Multiple Fronts

AI is set to be a crucial growth driver for all stocks within the Magnificent Seven. Companies like Amazon, Microsoft, and Nvidia are also involved in quantum computing, while others like Tesla are entering the robotaxi arena in various capacities.

Yet, none of the other companies in the Magnificent Seven can match Alphabet's leadership across these tech domains. Moreover, Alphabet stands out for additional reasons.

In financial terms, Alphabet holds a significant lead with its cash reserves, totaling around $93.2 billion. This amount is more substantial than that of any other Magnificent Seven firm, positioning Alphabet excellently to invest further in research and development across AI, quantum computing, and robotaxis.

The stock itself is also competitively priced among the Magnificent Seven, with only Nvidia boasting a lower price-to-earnings-to-growth (PEG) ratio than Alphabet's PEG of 1.27.

Important Factors to Monitor

Investors should pay attention to two potential challenges that could impact Alphabet negatively. First, a federal judge ruled in August 2024 that Google violated antitrust laws by establishing an illegal monopoly in the search engine market. Alphabet is also facing ongoing antitrust litigation concerning its practices in digital advertising.

However, Google is appealing the antitrust decision, and many legal experts believe the company’s case is strong, possibly leading to limited remedies that would not drastically affect its operations.

Regarding the threat of generative AI to Google Search, the company has already begun integrating this technology through its AI Overviews. As a result, Google continues to see growth in its search advertising revenue. Alphabet's CEO, Sundar Pichai, noted in a recent earnings call that these new features have boosted both search usage and user satisfaction, with the integration of ads working well.

While there are some uncertainties on the horizon, the outlook remains optimistic. Alphabet’s strong presence in AI, quantum computing, and robotaxis reinforces its status as an attractive pick among the Magnificent Seven stocks to consider now.

Note: The views expressed herein do not represent investment advice. Investors should always conduct their own research.

AI, Investment, Technology