The Nasdaq Composite (NASDAQINDEX: ^IXIC) had a monster run of two years. After gaining 43% in 2023, the index rose by around 30% in 2024, marking one of the best performing periods in its history.
Contrary to what your intuition may tell you, this does not mean that the index is ripe for a correction in 2025. In fact, the opposite may happen. Going back to 1972, every year with a return of 30% or higher was followed by an average return of 19%, likely due to the momentum factor. Although it is not guarantee good returns for your portfolio in 2025, it looks more likely than not that the good times will roll, given the historical data.
History shows that the Nasdaq could soar again in 2025. Here's one artificial intelligence (AI) stock to buy before it does.
Nasdaq returns over the past two years have been driven by the AI boom. There are many stocks related to AI, such as Nvidianow trading at bearable earnings multiples. However, one remains undervalued and is hiding in plain sight for investors to buy in 2025: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
The owner of Google, YouTube, and other tech assets has been dogged by a narrative that it is losing market share to new AI tools like ChatGPT. It is true that ChatGPT has gained a lot of popularity, but it has not come at the expense of Google Search profitability. According to third-party estimates, Google Search still has a market share of around 90% among search engines worldwide, which has not budged much in the last few years.
Google is embedded in the modern digital operating systems and has billions of daily users. Now, the company has an opportunity to charge the business with new AI products, such as its new search results summaries, the Gemini chatbot, and Google Lens (which allows you to search what you see). Google wants to let you search for anything in the world around you and get a thoughtful, AI-powered response behind it. This will open up more opportunities for search queries in day-to-day life, which will lead to more advertising revenue for the business.
Last quarter, Google Search revenue grew 12% year over year to $49 billion.
Alphabet has many levers it can pull to keep revenue and earnings growing. The above AI boom will help grow Google Search. There's YouTube, which continues to gain market share in video streaming and revenue grew 12% last quarter. Google Cloud is helping Alphabet sell its AI innovations to third parties and grow revenue by a whopping 35% year over year. At this pace, the segment will reach $100 billion in annual revenue in a few years.
