Better Buffett Stock: Alphabet vs. Apple
Apple has slow-played its AI launch, while Alphabet has accelerated its AI plans.
Warren Buffett, former CEO of Berkshire Hathaway, made some notable investments throughout his career. One such investment was in Alphabet, which he later regretted not buying sooner. Prior to leaving his position, Buffett purchased Alphabet shares, and current CEO Greg Abel has continued to buy Alphabet shares, indicating confidence in the stock.
Another investment Buffett identified early on was Apple, which turned out to be one of his best investments ever. The question now is, between Alphabet and Apple, which one is the better investment at the moment? It may depend on whether you are bullish on artificial intelligence (AI) or not.
Alphabet is heavily investing in AI, with plans to spend about $200 billion on data center capital expenditures this year. These data centers will be used for renting out cloud computing services and computing capacity for Alphabet's Gemini platform. Alphabet has positioned itself as an AI-first investment, but some may be wary of its all-in approach to an emerging technology.
On the other hand, Apple is taking a different approach. Instead of rapidly increasing its AI computing power, Apple plans to deploy Google's Gemini model on its devices, which will help cut development costs. While Apple's AI features are not as advanced as some would like, the revamped Siri AI is receiving positive reviews. However, Apple may lose market share to Android phones that are pioneering AI technology.
When comparing the two stocks from a valuation standpoint, Apple is the more expensive investment. It has a valuation of 36 times fiscal 2027 earnings, making it the most expensive big tech stock in recent years. In contrast, Alphabet trades at a much cheaper valuation of 22 times next year's earnings. This makes Alphabet about two-thirds the price of Apple when accounting for the one-quarter difference in their earnings projections.
Considering these factors, Alphabet appears to be the better buy at the moment. Its lower stock price, combined with the major upside potential presented by AI, makes it a more attractive investment. While Apple is a strong company with a loyal customer base, its high valuation makes it less appealing compared to Alphabet.
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