Cathie Wood is known for making high-conviction bets on speculative stocks. Wood recently scooped up shares of Alphabet, despite a bearish narrative surrounding the company's ambitions in artificial intelligence (AI). A close look at Alphabet's financial picture suggests the company's AI pursuits are paying off in spades.\n\nCathie Wood has earned a reputation on Wall Street for making high-conviction bets on emerging businesses seeking to disrupt legacy incumbents across industries such as technology, financial services, and pharmaceuticals. With that said, every now and again, Wood complements some of the more speculative positions in Ark's portfolio with well-established blue chip opportunities.\n\nWhen it comes to artificial intelligence (AI) stocks, it should come as no surprise that Ark's portfolio includes several high-flying growth stocks such as Palantir Technologies, CrowdStrike, and CoreWeave. Also in the mix, however, are several members of the 'Magnificent Seven.' In late July, Ark added to an existing position in Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) -- scooping up 181,640 shares in the ARK Next Generation Internet ETF.\n\nLet's explore how Alphabet is investing in AI to transform its business. From there, I'll break down some financial and valuation trends to help illustrate why Alphabet stock looks like a no-brainer right now.\n\nAlphabet recently reported operating results for its second quarter, which ended June 30. The company's largest source of revenue -- advertising -- generated $71.3 billion in revenue, growing by 10% year over year. Advertising growth from Google Search and YouTube was even more robust, coming in at 12% and 13%, respectively.\n\nOver the last few years, skeptics on Wall Street have been parroting a bearish narrative that the rise of ChatGPT and other competing large language models (LLMs) will diminish Google's dominance in search. Accelerating growth between Google Search and YouTube suggests that advertisers still see a high return on investment (ROI) from these platforms, despite some shifts in how people are consuming content on the internet.\n\nWhere investors may be getting nitpicky is around Alphabet's profit margin profile. The advertising segment sits under a larger category of Alphabet's business, called Google Services. During the second quarter, Google Services grew its revenue 12% year over year to $82.5 billion. However, the operating margin for the Services business remained flat year over year -- coming in at 40%.\n\nWhen expenses grow in line with revenue, profit margins become capped. On the surface, this may look like Alphabet is not running an efficient business despite an accelerating top line. I wouldn't rush to such a conclusion, though.\n\nOver the last few years, Alphabet has made a number of strategic investments to bolster its AI position. For starters, the company augmented its cloud infrastructure business by acquiring cybersecurity start-up, Wiz, for a reported $32 billion. On top of that, Alphabet's multibillion-dollar investments in AI data centers are often underappreciated -- and yet it's this infrastructure that attracted OpenAI, a perceived rival, as one of Google Cloud's new major partners.\n\nLastly, Alphabet is also quietly building its own quantum computing operation through the development of its own custom chipsets, called Willow. Although monetizing quantum computing applications is still likely many years away, I find it encouraging that Alphabet is allocating capital across several pockets of the AI realm in an effort to build a diversified ecosystem that strengthens core businesses while opening the door to new opportunities as well.\n\nThe chart below benchmarks Alphabet against many of its big tech peers on a price-to-earnings (P/E) basis. Ultimately, I think Alphabet stock is being punished by investors because the company isn't posting growth as robust as some of its peers.\n\nIn my eyes, the fact that the company continues to grow revenue from its core businesses while striking lucrative deals with rivals and maintaining its profit margin profile in the face of aggressive investments shows a high degree of resiliency from Alphabet. Given the disparity in valuation multiples illustrated above, I think that the bearish narrative appears to be fully baked into Alphabet stock at this point.\n\nTo me, Alphabet is positioned for significant valuation expansion in the coming years as its infrastructure investments continue to bear fruit. I think Wood identified a rare opportunity among major AI players by identifying such a cheap stock floating around in a sea of frothy valuations. I see Alphabet stock as a no-brainer buying opportunity at its current price point for long-term investors.\n\nBefore you buy stock in Alphabet, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*\n\nNow, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.\n\nAdam Spatacco has positions in Alphabet, Amazon, Apple, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, CrowdStrike, Microsoft, Nvidia, Oracle, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.\n\nThe views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Cathie Wood Goes Bargain Hunting. 1 Dirt Cheap Artificial Intelligence (AI) Stock With Monster Potential She Just Bought

Cathie Wood, known for high-conviction bets on emerging technologies, has recently increased her position in Alphabet (GOOGL/GOOG) despite a bearish narrative around its AI ambitions. The article highlights Alphabet's strong advertising revenue growth, with Google Search and YouTube seeing 12% and 13% year-over-year increases, respectively. While profit margins in the Google Services segment remained flat at 40%, the company has made strategic investments in AI infrastructure, including a $32 billion acquisition of cybersecurity startup Wiz and significant investments in AI data centers that have attracted major partners like OpenAI. Alphabet is also developing its own quantum computing capabilities through custom chipsets called Willow. The article argues that Alphabet's core business resilience, strategic investments, and undervalued stock price make it a compelling opportunity amid a market of high valuations in other AI stocks. The Motley Fool, which includes Alphabet in its recommended list, notes a strong historical track record of returns from similar recommendations, such as Netflix and Nvidia.