$GOOGL · Invest with Henry · 2026-11-02

The first arrow is Google. Google is one of the most interesting stocks I'm currently watching because the stock has recently been sold off even though the core business continues to generate huge revenues and profits.

The biggest concern for the market is not necessarily that Google's business is collapsing. The concern is how much money Google is spending to compete in the field of artificial intelligence and whether those investments will ultimately yield sufficient returns.

Following its third-quarter earnings , Alphabet experienced one of its worst post-earnings declines in decades, falling by approximately 13%. There were three main concerns when their earnings report was released.

The first is that search revenues continued to grow, but came in lower than Wall Street had expected. This is particularly important because investors fear that ChatGPT and other AI products could capture market share from traditional Google search .

Secondly, Google's spending on artificial intelligence is enormous. The company is pumping tens of billions of dollars into data centers , artificial intelligence infrastructure, and its own chips.

Third, this spending puts pressure on free cash flow. Investors essentially want Google to prove that all this investment in artificial intelligence will ultimately yield a huge return.

But this is where Google's story becomes really interesting. Google says search query growth is the strongest it has been in years. So at the moment, we don't see artificial intelligence simply destroying Google search .

Instead, Google is integrating artificial intelligence directly into search and changing the way people interact with the product .

Google also possesses what can be considered one of the strongest distribution advantages in the entire artificial intelligence industry. Think about what Google already owns: Search, Chrome, Android, YouTube , Gmail, Maps, Workspace, and Gemini .

Most AI companies have to spend huge sums of money to attract users. Google already has billions of users across its ecosystem.

Then there is Google Cloud, which has become an increasingly important part of Google's business as demand for AI computing continues to grow.

Google also controls a huge portion of its own artificial intelligence technology. They have their own data centers, "TPU" chips, the " Gemini" system, "Google Cloud", and a huge distribution base for consumers.

Google spent years developing its own "TPU" chips instead of relying entirely on graphics processing units from "Nvidia". This gives Google greater control over the cost and performance of its artificial intelligence infrastructure.

Then there is the data advantage that Google possesses. The search engine tells Google what people are searching for. YouTube tells Google what people want to watch. Google Maps shows Google the local intentions of users.

Google Shopping provides commercial intent. In addition, there is the Android system, which provides massive distribution on mobile devices. The list is really long. Gmail and Workspace provide Google with another huge ecosystem of users.

Therefore, when I analyze Google's position in the field of artificial intelligence, I am not simply comparing "Gemini " to "ChatGPT". I'm looking at the entire ecosystem. Google controls the infrastructure, chips, artificial intelligence models , cloud computing, consumer distribution, and is one of the world's largest advertising companies.

The biggest challenge remains the search engine, which has actually performed very well. If consumers increasingly move away from traditional search and turn to AI-powered assistance, Google could face pressure on one of its most important businesses.

However, this transformation is happening very quickly and there are many opportunities in it, but I am very optimistic about Google's ability to adapt . This is a real risk that investors should be aware of.

I own a lot of shares in this company. I had over a million dollars in Google stock, and to be honest, I'm now losing money on that stock, which is surprising given how low Google's value has fallen.

I mean, look at the annual performance here. Google's stock is literally down on a year-over-year basis. This is a very bad return. However, you can see something interesting here, which is that last March, Google's stock was trading at $273 per share, and that was after a significant drop from the levels of February.

These drops from the February levels were quite dramatic, weren't they ? Google reached its lowest point on March 30 at $273 per share before experiencing a very large rise.

Well, what I think is that something very similar will happen to Alphabet. I think what will happen now is that this also represents a bottom for the stock. Therefore, I think the stock will return to a more reasonable level around what it was before the post- earnings drop. It might even rise further to the $350 range.

The reason I say this is not because I am a genie or can predict the future or that I am a financial advisor or anything like that, I am none of those things. But what I see as logical and reasonable for Alphabet is that the stock will rise because the company is still generating a lot of cash flow.

Although they are spending more on artificial intelligence in the short term, this spending will not last forever. Google's competitive advantage will continue to generate a lot of money for them.

So, I believe once again that Google's fair value in the future will be $350 per share in 2027. Let me show you what I'm going to do now. I will be trading Google stock options.

I will buy a call option. What I will do is choose an expiry date that gives me plenty of time. Good? I will choose December 17, 2027.

This is the first long-term option (LEAP) that I will present to you. Now, what is the "Lip" option? A "leap" option is simply a long-term buy option with an expiry date. The way I developed my options structure, or my strategy for "LEAP" options, is by using what I call "DEEP".

Good? Any option that is " Lip" Deep In The Money. What this looks like is essentially a buy option that already has a high delta. So, let's choose something in the money like an execution price of 270 .

Good? This option has a delta of 0.65. My "deep" strategy is based on approximately a delta of 70 . But this is slightly less, which is acceptable. This is the lowest Delta here with a premium price of $5400, which is a rather expensive price.

But if you compare that to buying 100 shares, it would cost you $28,000, wouldn't it? Therefore, paying $5,400 is a much bigger advantage than buying 100 shares that would cost you $28,000.

Good? So, what is this in front of us? Well, this is basically an alternative to owning the stock. This call option, or " DEP" as I call it, effectively eliminates the need to own 100 shares because the call option controls 100 shares for a fraction of the cost.

So, if you enter into this option here and are prepared to pay the premium, which is $54 per contract, you can see that my break-even point is $322. And now again, I said that I believe Google is worth $350 or even more in 2027.

So, if I hold onto this option until the expiration date , I'll make a good profit, right ? 350 is much higher than my breakeven point of 322.

However, what I want to do instead is buy a call option, and my goal, and I wish I could simulate the return here, is to... you can usually do that once you own the option. But once I have this option, I will hold onto it for about 6 to 8 months and well before the expiration date in December , before this option really starts to lose a lot of its value due to time erosion (theta), right ?

Therefore, the last three months remaining are when the option really starts to erode significantly. So, before I reach that final stage, I will just be making profits. I will close this position and record a profit in my LEAP position .

So, this is the goal of my "leave" strategy, which is that I will not hold onto the option until the expiration date . My goal will be to take profits sometime this summer, such as June 2027 or July 2027, and exit this position.

For example , if Google stock is trading at $320 per share, right? It is less than my break-even point, but that does not mean I will be a loser in this option. In fact, I could be a very profitable option even though I'm not even above my breakeven price.

That's simply because when the stock rises, the option gains value, okay? It acquires value at a "delta" rate. So, if the stock rises by $10, you multiply 10 by the delta. This basically means that the " Lip" option will gain a value of $6.50, okay?

That's a huge amount considering that $6.50 as a percentage of the premium you pay is more than 10% of the premium value, isn't it ? Do you see where I'm trying to get with this talk ?

A $10 move in the stock, which is n't really a big move, is a huge move in the "leave" option itself. So, what I'm going to do is simply manage this deal and take profits from it a little earlier, or actually well before that, in the summer of 2027.

So the question is very similar to another stock I've been covering for a long time, namely Google, which is a huge center in my investment portfolio.