Nasdaq(US:NDAQ) The Motley Fool·2025-01-12 08:15Nasdaq Performance and AI Trend - The Nasdaq Composite gained 43% in 2023 and around 30% in 2024, marking one of its best-performing periods [1] - Historical data suggests that years with 30% or higher returns are followed by an average return of 19%, indicating potential for continued growth in 2025 [2] - The AI boom has been a key driver of Nasdaq's recent performance, with many AI-related stocks trading at high valuations [4] Alphabet's AI Opportunity - Alphabet (Google) is undervalued despite the AI boom, with Google Search maintaining a 90% market share globally [5] - Google Search revenue grew 12% YoY to $49 billion last quarter, driven by its dominance in search engines [7] - Alphabet is leveraging AI to enhance its products, including search result summaries, the Gemini chatbot, and Google Lens, which could increase search queries and advertising revenue [6] Alphabet's Growth Levers - YouTube revenue grew 12% last quarter, gaining market share in video streaming [8] - Google Cloud revenue grew 35% YoY, with the segment on track to reach $100 billion in annual revenue in a few years [8] - Alphabet's operating margin expanded to 32% last quarter, up from 28% a year ago, driven by scale and operating leverage [9] - The company has reduced shares outstanding by 11% over the last five years, boosting earnings per share (EPS) [9] Valuation and Investment Case - Alphabet trades at a P/E ratio of 26, below the S&P 500 and Nasdaq Composite averages of over 30 [10] - The AI boom is expected to drive Alphabet's EPS growth above the market average, while its valuation remains attractive [11] - Investors are encouraged to buy Alphabet stock for long-term growth, particularly through 2025 and beyond [11]