To The Moon

Still Playing 4D Chess While the Market Plays Draughts

Sometimes, the market hands you a gift wrapped in an unassuming package. Right now, Alphabet—Google’s not-so-secret corporate alter ego—appears to be precisely that. With a price-to-earnings ratio of 20.7, well below its five-year average of 24.6, and a price-to-sales ratio of 5.9 (versus a historical 6.04), this Silicon Valley juggernaut is trading at what I’d call a 'how-is-no-one-noticing-this' discount. In investment terms, it’s akin to discovering a Michelin-star meal on a budget menu.

Alphabet plays quantum chess while rivals struggle with yesterday’s moves

Beyond Search: Alphabet’s Quantum Gambit

Most investors fixate on Alphabet’s advertising dominance—a cash cow that keeps on giving—but they’re missing a moonshot that could redefine computing itself. Google Quantum AI isn’t just toying with quantum mechanics; it’s making serious strides. The Willow quantum chip, Alphabet’s latest breakthrough, could shatter one of quantum computing’s biggest hurdles: error correction. If this technology matures as expected, it won’t just improve computing speeds—it could change entire industries.

Imagine pharmaceutical companies using quantum simulations to discover drugs in record time or financial models running at a complexity level beyond what classical computing can fathom. If $Alphabet(GOOGL)$ cracks the quantum puzzle before its rivals, we’re looking at a moat wider than the Pacific.

'Other Bets' No Longer Just Expensive Hobbies

Alphabet’s 'Other Bets' division has long been regarded as a collection of expensive science projects, but that perception is rapidly shifting. Waymo, the company’s autonomous vehicle arm, has facilitated over four million passenger trips and recently secured a valuation north of $45 billion. A staggering sum for something previously dismissed as a cash incinerator.

Meanwhile, Verily, Alphabet’s life sciences venture, is making inroads in disease detection and precision medicine. These aren’t just speculative endeavours anymore—they’re shaping up to be revenue generators that could add meaningful diversification to Alphabet’s business beyond its reliance on digital ads.

From a financial perspective, the transformation is already materialising. Google Cloud revenue jumped 30% year-over-year to $12 billion in Q4 2024, reinforcing Alphabet’s growing enterprise footprint. And in a rare nod to dividend seekers, the company now boasts a forward yield of 0.48%, a subtle but telling shift in capital allocation priorities.

Alphabet's empire: Services dominate, Cloud rises, Other Bets gain ground

AI: Alphabet’s Secret Sauce That’s Not So Secret

While competitors fumble to bolt AI onto their businesses, Alphabet has been laying the groundwork for an AI-dominated future. Its AI Overviews feature in Search hints at a profound shift in how we interact with information, improving both user experience and advertiser precision. The ripple effect? A reinforcement of Alphabet’s already formidable advertising model while simultaneously opening up new monetisation avenues.

Google Cloud’s AI capabilities are also driving growth, making it the only top-three cloud provider to gain market share in 2024. Unlike some of its rivals, $Alphabet(GOOGL)$ isn’t just using AI as a marketing buzzword—it’s weaving it into the fabric of its business.

What the Market Hasn’t Fully Priced In

Here’s a detail that’s flown under the radar: Alphabet’s cloud capacity is currently struggling to keep up with demand. While at first glance this might seem like a problem, it actually signals massive untapped potential. The company is responding with an aggressive $75 billion capital expenditure plan in 2025—an investment that should supercharge growth in the coming years.

Another overlooked gem? YouTube is now the most-watched streaming platform in the U.S., surpassing traditional television in viewing hours. With Q4 ad revenue up 14% year-over-year to $10.5 billion, YouTube has quietly become a dominant force in digital entertainment. And unlike its streaming rivals, YouTube doesn’t need billion-dollar content budgets—it gets its creators to foot that bill.

The Verdict: A Buy for the Patient Investor

Alphabet has a history of weathering storms and coming out stronger. After tumbling 39% in 2022, the stock rebounded nearly 58% in 2023—a testament to its resilience. Currently trading around $167, well below its 52-week high of $208.70, the stock presents an attractive entry point for long-term investors. With a one-year target estimate of $218.17, the upside potential is compelling.

Ultimately, $Alphabet(GOOGL)$ offers a rare blend of market dominance, innovation, and financial strength. While regulatory risks and competition remain factors to watch, the company’s positioning in quantum computing, AI, and cloud infrastructure makes it one of the most intriguing investment opportunities today.

Alphabet’s hidden treasures: waiting for investors to connect the dots

Or, to put it in British understatement: this one seems like a rather good deal, wouldn’t you say?

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