Alphabet's Shares Experienced a Surge Today
Alphabet's stock recently saw a 2% boost around 10:30 a.m. ET on Tuesday, sparked by President Trump's initial moves in his second term. This executive order revoked an earlier one, this time by his predecessor, Joe Biden. Biden's order aimed to establish safety standards for AI models and mandate developers to share the outcomes of AI model safety tests with the U.S. government before public release.
But what does the new Trump order truly bring to the table? It's a bit hazy. AI giants like Google, Microsoft, and Amazon could potentially save some dough due to reduced regulations. This could likely boost their profits incrementally, making for a small yet justified stock price boost for Alphabet.
Moreover, Trump's action might hint at a broader support for AI within the industry, which could significantly benefit Alphabet's business. But is Alphabet stock a smart investment at this stage? That's the million-dollar question.
With a 25.5 P/E ratio and a 17% projected long-term earnings growth rate, Alphabet's stock might not come at an unreasonable price. However, draining a considerable amount of cash on AI investments means the free cash flow barely covers 60% of the net income. To put it simply, the price tag of 43 times the free cash flow could be steep for 17% growth.
In conclusion, whether the reduced costs and unknown opportunities cushion Alphabet stock's value justifies the current price remains up for debate. It's a buy, you ask? Probably not, at this juncture.
The potential savings from reduced regulations could boost the profits of AI giants like Google, potentially leading to incremental stock price increases. This Trump order might signal a broader industry support for AI, which could significantly benefit Alphabet's business in terms of finance and investing.