With the Nasdaq down 6% over the last 12 months, tech stocks still haven’t fully recovered from the 2022 bear market. That said, some companies are beginning to surge as investor optimism returns. Let’s explore why the bull runs could be just getting started for Alphabet (GOOG 0.01%), (GOOGL 0.11%) and Global-e Online (GLBE 1.66%).
Up by 18% year to date, Alphabet stock is beginning to recover from one of its biggest crashes on record. And while inflation and macroeconomic uncertainty will pressure the digital advertising industry, investors shouldn’t underestimate the company’s ability to diversify its revenue streams through new opportunities in artificial intelligence (AI).
So far, Google’s generative AI chatbot, Bard, has been compared unfavorably to rivals like ChatGPT. But investors should remember that this is only the first chapter in a story that could take decades.
Alphabet owns the world’s two most popular websites, Google and YouTube. And this means it has a trove of consumer data, specifically related to search and browsing activity. As generative AI chatbots are trained on a body of real-world data, this is an economic moat that rivals will struggle to replicate.
Alphabet is also targeting the infrastructure side of the AI opportunity through its new Tensor Processing Unit (TPU) chip, which it claims is 1.7 times faster than the Nvidia A100 chips used to train ChatGPT.
With a price-to-earnings (P/E) multiple of just 20, Alphabet stock is relatively cheap compared to other AI leaders like Microsoft, which trades at a P/E of 26, and Nvidia, which trades at a P/E of 60.
2. Global-e Online
Like Alphabet, Global-e is a tech stock that’s rapidly bouncing back from the 2022 bear market, with shares up by 41% year to date. Business is booming. And the company’s picks-and-shovels strategy helps protect it from some of the uncertainty in consumer-facing e-commerce.
Instead of selling products directly to consumers, Global-e helps merchants expand internationally by offering things like customs compliance and localized customer service. These services help clients maintain and grow their businesses, which could help keep demand buoyant, even in uncertain economic times.
Fourth-quarter revenue jumped 66% to $839 million, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) almost doubled to $21.8 billion.
Global-e isn’t consistently profitable yet on the basis of generally accepted accounting principles (GAAP), so it can’t be valued based on earnings. And while its price-to-sales (P/S) ratio of 12 is quite high, this premium reflects its rapid growth rate and the potential for significant future earnings as the business matures.
Which company is better for you?
Alphabet and Global-e Online are both great picks for investors who want to bet on a recovery in tech, but they serve different investment strategies. As a consistently profitable and mature company with a relatively low price tag, Alphabet will appeal to more value-oriented investors. On the other hand, Global-e offers more-explosive growth potential, although conservative investors might balk at its high valuation.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Will Ebiefung has positions in Global-e Online. The Motley Fool has positions in and recommends Alphabet, Global-e Online, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.