Google’s stock is following its Magnificent Seven peers lower so far this year. But it could be a potential buy if certain factors end up working in the search engine giant’s favor.
So far, the broad equities market is feeling the correction after a market rally starting at the end of last year began to lose steam. Google is down about 12%, largely following the broader sell-off, especially in tech, as seen in the Nasdaq-100’s YTD drop of about 6%.
However, Google has potential tailwinds, as outlined by Yahoo Finance. One of them is the artificial intelligence theme, which has lost some luster in the latest sell-off, but is still a viable long-term trend. Google is investing more in its AI capabilities, especially to help bolster its bread-and-butter revenue generation source: ads.
“Alphabet derives about three-quarters of its revenue from ads, so it’s critical that it stay on top of its game in this sector,” Yahoo Finance noted. “Alphabet has done this by developing various generative AI tools based on its proprietary Gemini model, which is part of the reason why it’s spending so much on AI infrastructure.”
In today’s macroeconomic environment, cost is certainly a factor, and that especially flows over into IT spending. Rather than investing in building out their own data centers, more companies are opting to utilize cloud computing. This is an area where Google can also continue expanding its Google Cloud Platform (GCP), sustaining revenue moving forward.
“Cloud computing is a huge component of the AI arms race, as few companies want the upfront cost of buying a data center outfitted with best-in-class graphics processing units (GPUs) and then maintaining it throughout its service life,” Yahoo! Finance noted, adding that companies would rather opt to “rent the computing power and run workloads on the cloud.”
Play the Google Trends
While the factors presented might work well for Google in the long-term horizon, traders are concerned with present opportunities. This is where single-stock ETFs allow for this flexibility with two products from Direxion. They are the Direxion Daily GOOGL Bull 2X Shares (GGLL ) and the +Direxion Daily GOOGL Bear 1X Shares+ (GGLS ).
GGLL allows traders to maximize their profit potential to Google stock by allowing 2x exposure. If traders suspect the price correction is over and it will retrace, then GGLL is ideal for buying the dip.
On the other hand, GGLS allows traders to hedge against any downside in Google’s stock to potentially limit losses on a bullish position or even profit from the downtrend on a single position. This is especially helpful if an earnings report is unfavorable.
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