Google parent Alphabet (GOOGL) appears to be forming a bullish three-weeks-tight pattern as it gets poised for its next move. Google stock is dancing around all-time highs after an earnings gap-up.
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The IBD Big Cap 20 name saw first-quarter strength in its Search, YouTube and Cloud businesses, with its cloud computing revenue growing 28%. But it faces stiff cloud competition from the likes of fellow Magnificent Seven names Amazon (AMZN) and Microsoft (MSFT).
Alphabet says it’s committed to expanding its artificial intelligence capabilities. “Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” said CEO Sundar Pichai in the first-quarter earnings release.
In Q1, Alphabet’s capital spending jumped 91% to $12 billion over the prior year’s period. The increase is being used to bolster its AI infrastructure, including servers and data centers. Google uses its AI assistant, Gemini, in its search engine, maps, writing, translation and image-generation products.
As part of its global expansion, the AI leader announced it will invest $2 billion to set up its first data center in Malaysia to power search, maps and cloud services, the Wall Street Journal reported.
Alphabet is pairing up with Japanese digital, power and energy firm Hitachi on a multiyear partnership to promote AI using Google’s cloud and Gemini AI technology. In addition, Google Cloud is collaborating with Norway-based Opera (OPRA) to integrate Gemini models into its Aria browser AI.
Google Stock Sets Up For Next Move
The IBD 50 stock is on track to form a three-weeks-tight formation with a 178.77 buy point. Volume is drying up as investors wait for the next catalyst before diving in.
The AI stock broke out of a second-stage cuplike base with a 153.78 buy point on April 1, according to MarketSurge pattern recognition. Shares soared 10.2% in heavy trading after the company easily beat first-quarter earnings and sales estimates on April 25.
The stock pulled back the following two days before climbing to a record high on May 20. The AI stock has gained around 24% year to date.
Profit Growth Looks Bright
Alphabet’s first-quarter earnings growth accelerated to 53%, up from 42% in the prior two quarters. Meanwhile, its Q1 revenue growth steadily improved to 15% from 3% in the prior year’s period.
In addition, Alphabet announced its first-ever dividend of 20 cents per share and a new $70 billion stock buyback. FactSet’s full-year 2024 profit estimates guide for 35% growth, then a 13% increase in 2025.
Mutual funds have been adding Google stock, with 7,320 owning shares in March, up from 7,241 in December and 7,135 in September. It holds a 1.6 up/down volume ratio, indicating robust demand for the stock over the last 50 days.
IBD Mutual Fund Index names Fidelity Contrafund (FCNTX) and MFS Growth Fund (MFEGX) hold Google stock. Contrafund owned 20 million shares and MFS Growth owned 17.5 million shares of the AI stock at the end of March. Alphabet holds a pristine 99 IBD Composite Rating and a near-perfect 98 EPS Rating.
Follow Kimberley Koenig for more stock market news on X/Twitter @IBD_KKoenig.
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Wanda Parisien is a computing expert who navigates the vast landscape of hardware and software. With a focus on computer technology, software development, and industry trends, Wanda delivers informative content, tutorials, and analyses to keep readers updated on the latest in the world of computing.
