This artificial intelligence (AI) stock looks like a no-brainer buy right now

The artificial intelligence revolution is reshaping industries, but it's also creating a paradoxical situation for investors. Many seek the next big AI winner, often overlooking established giants adapting and thriving within this new paradigm. While some companies in the AI space now command sky-high valuations, one particular tech titan is showing immense strength and growth, yet remains surprisingly undervalued. Are you missing out on a foundational AI play that’s poised for significant upside?

Dispelling the Myth: Google Search and AI Integration

For a period, a prevailing narrative suggested that Google's foundational Search business would be undermined by generative AI. Critics argued that new AI chat interfaces would render traditional search engines obsolete. However, recent developments paint a very different picture. Google has not only integrated generative AI search overviews directly into its core experience but has done so effectively, ensuring its continued relevance.

Search's Enduring Strength

Despite the doomsayers, Google Search continues to demonstrate robust performance. In the second quarter alone, Search revenue climbed an impressive 12% year over year, reaching $54.2 billion. This growth, for a mature business unit of this scale, effectively nullifies the primary bear argument against Alphabet. It’s clear that Google Search isn’t going anywhere; instead, it’s evolving and expanding its utility with AI.

Google Cloud: Powering the AI Revolution

Beyond Search, Alphabet's Google Cloud division stands out as a critical growth engine, directly benefiting from the surge in AI demand. Companies worldwide are grappling with the immense computational requirements of AI workloads. Building and maintaining the necessary data centers is a monumental task, pushing many to outsource these crucial needs to cloud computing providers.

A Preferred Destination for AI Innovators

Google Cloud has rapidly emerged as a top choice for these demanding workloads. Its capabilities are so compelling that even leading AI entities like OpenAI, the creator of ChatGPT, and Meta Platforms have recently chosen Google Cloud as their provider. These are companies with the resources and technical expertise to select any major cloud service, yet they opted for Google, underscoring its superior offering in the AI infrastructure landscape.

This success translates directly into financial performance. Google Cloud’s revenue soared by an impressive 32% year over year in Q2, hitting $13.6 billion. Crucially, its operating margin has also seen substantial improvement, jumping from 11% to 21% over the past year. As it scales, there's significant room for further margin expansion, positioning Google Cloud as a highly profitable growth driver for Alphabet.

Beyond the Core: The Expanding Ecosystem

Alphabet’s innovation extends far beyond search and cloud. Its self-driving car division, Waymo, is also experiencing substantial growth, though its specific revenue contributions are not yet separately disclosed. These diversified ventures demonstrate Alphabet’s broad strategic investments and its capacity to cultivate multiple future growth engines simultaneously.

Overall, Alphabet's second-quarter results were exceptionally strong, with total revenue increasing by 14% and diluted earnings per share (EPS) rising by 22%. This level of performance is remarkable for any company, especially one that some analysts predicted would falter in the face of AI disruption. Alphabet isn't just surviving; it's thriving and expanding its lead.

The Undeniable Valuation Opportunity

Despite this impressive growth and strategic positioning within the AI sector, Alphabet's stock trades at a perplexing discount. While many tech giants command forward price-to-earnings (P/E) ratios in the high 20s or even low 30s, Alphabet can be acquired for less than 21 times forward earnings. This valuation is not only cheaper than many of its direct competitors but also significantly below the S&P 500, which trades at 23.7 times forward earnings.

Alphabet's profits are accelerating faster than some of its peers, yet the market continues to price in lingering concerns about AI disruption that appear increasingly unfounded. This creates a compelling opportunity. Investing in a company that is demonstrably outperforming expectations, integrating AI effectively, and trading at a substantial discount to both its industry and the broader market offers a rare combination of safety and significant upside potential.

Act Now: Seize the Discounted Growth

The message is clear: Alphabet is not just another tech stock; it's a powerhouse navigating the AI landscape with strategic prowess and delivering concrete results. Its undervaluation, coupled with its robust growth and leadership in critical sectors like AI infrastructure, makes it a truly compelling investment. Don't let outdated fears obscure this undeniable opportunity. Evaluate Alphabet for your portfolio and position yourself for the continued evolution of the AI era.