This AI Stock Is Down 13%, but Could Be the Safest One Out There

AI stocks can look unstoppable until investors remember that great demos don’t always equal durable profits.

Key Points
  • AI leadership is shifting by task, so betting on one model winning forever is risky.
  • Alphabet can fund massive AI spending because Search, YouTube, and Cloud already generate huge cash flows.
  • Even with big capex and Search disruption risk, the stock’s valuation looks relatively reasonable for AI exposure.

The artificial intelligence (AI) boom has produced plenty of stocks priced as though the future has already signed a 10-year contract. That can be thrilling while everything rises. It becomes slightly less charming when investors discover that a promising chatbot and a durable business aren’t the same thing.

Safety in technology doesn’t mean the share price can’t fall. It means the company can fund enormous investments, survive a weaker product cycle, and keep earning money if its newest AI model doesn’t win every benchmark. Investors searching for AI stocks should therefore look beyond the cleverest demo to the business paying for all those chips, data centres, and engineers.

Abstract Human Skull representing AI

Source: Getty Images

One revealing AI test

A recent Omni Calculator study put Claude Sonnet 5 and Gemini 3.6 Flash through real finance tasks. The models had to build interactive calculators, solve complicated math problems, and answer financial-knowledge questions, including ones involving recent tax changes.

Claude won overall with an 88.8% score versus Gemini’s 83.5%, largely because it dominated calculator creation by 89.4% to 68.8%. Gemini then flipped the result on direct math, scoring 90% against Claude’s 82.5%. Both earned 100% on general financial knowledge. No single model swept the floor, which may be the most useful result of all.

AI leadership may be divided by task rather than awarded permanently to one winner. That favours a company able to improve its model while monetizing AI through several enormous businesses, which brings Alphabet (NASDAQ: GOOGL) into focus.

The safer AI stock

Alphabet stock owns Google Search, YouTube, Android, Google Cloud, and Gemini. Search advertising still pays the bills, cloud customers rent its computing infrastructure, and Gemini can be distributed across products already used by consumers and businesses. A smaller AI company must first find customers. Alphabet stock can place its newest tools directly in front of them.

The latest quarter suggests that strategy is becoming financially useful. Alphabet stock’s revenue increased 24% year over year to US$119.8 billion, while Google Cloud revenue surged 82% as demand rose for AI infrastructure and enterprise AI products. Gemini may have lost the Omni benchmark overall, but its math result shows the underlying product can still outperform a leading rival on valuable work.

Meanwhile, Alphabet stock trade near US$355, approximately 13% below their 52-week high of US$408.61. The stock changes hands at roughly 18 times trailing earnings. That’s an unusually ordinary valuation for a company participating in AI through software, cloud infrastructure, advertising, subscriptions, and devices.

Considerations

Canadians should remember that Alphabet stock trades in U.S. dollars, so currency movements affect returns. Understanding how to approach buying U.S. stocks from Canada can prevent conversion costs from nibbling at an otherwise sensible long-term purchase.

The largest risk is the bill. Management now expects 2026 capital expenditures of US$195 billion to US$205 billion, mainly to expand AI computing capacity. Spending at that scale can crush free cash flow if demand slows or competitors build better models. Search also faces the awkward challenge of adding AI answers without weakening the advertising machine funding the transformation.

Foolish takeaway

In short, Alphabet stock isn’t “safe” in the same sense as a savings account. It may simply be one of the safest ways to own the AI race, because shareholders aren’t betting the entire company on Gemini defeating every rival. They’re buying a profitable digital empire that can lose one benchmark, learn from it, and return for the next round with considerably deeper pockets.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy.

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