1. Alphabet Inc. (NASDAQ:GOOGL)
Short Interest as % of Shares Outstanding: 0.56%
Number of Hedge Fund Investors In Q2 2024: 216
Alphabet Inc. (NASDAQ:GOOGL) is a mega cap technology firm that is one of the industry leaders in artificial intelligence. Like other big tech companies, Alphabet Inc. (NASDAQ:GOOGL) also benefits from having access to its own foundational model. Called Gemini, it enables the firm to compete with Microsoft backed OpenAI, Facebook parent Meta, and Amazon’s Anthropic at the leading edge of the foundation AI industry. Alphabet Inc. (NASDAQ:GOOGL) also has a direct presence in the autonomous driving industry through its Waymo business division. More than 700 Waymo cars are present in San Francisco alone, and they have also come under criticism for fires, crashes, and traffic violations. Alphabet Inc. (NASDAQ:GOOGL) also offers robotaxi services, and Waymo shared in August that it offers 100,000 robotaxi rides in San Francisco, Los Angeles, and Phoenix, Arizona. Like Baidu in China, this provides Alphabet Inc. (NASDAQ:GOOGL) a sizeable lead over rivals and allows it to attune itself to market expectations. However, the bulk of the firm’s revenue is from the Google Search business, and any disruption from AI or regulatory or anti trust action from the government could create headwinds for Alphabet Inc. (NASDAQ:GOOGL).
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter. Here is what the fund said:
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
GOOGL tops our list of autonomous driving stocks that short sellers aren’t buying. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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