5) Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holdings: 165
Alphabet Inc. (NASDAQ:GOOG) offers various products and platforms in the US, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.
Despite short-term challenges, Alphabet Inc. (NASDAQ:GOOG)’s long-term outlook is positive. Its leadership in AI technology, together with a diverse product portfolio, places it well for healthy growth. Analysts opine that continued AI integration throughout products, expansion of cloud services (primarily in AI and machine learning capabilities), YouTube’s potential to tap a significant share of the shifting TV ad spend, and cost discipline and operational efficiencies are expected to act as potential growth drivers.
Wall Street analysts opine that AI advancements have aided other Alphabet Inc. (NASDAQ:GOOG)’s properties, like YouTube, where ML algorithms tend to improve content recommendations and ad placements. Over the long term, AI integration should result in new product innovations and revenue streams. This should further solidify Alphabet Inc. (NASDAQ:GOOG)’s position as a technology leader.
The growing importance of first-party data in a privacy-focused advertising ecosystem should fuel Alphabet Inc. (NASDAQ:GOOG)’s growth prospects. Its extensive user data throughout various products enables precise targeting and measurement. This is valuable to advertisers because third-party cookies are phased out. Alphabet Inc. (NASDAQ:GOOG)’s investments in AI and machine learning are placing it well to develop new ad formats and targeting capabilities that can offer increased ROI for advertisers.
Wedgewood Partners, an investment management company, published third-quarter 2024 investor letter and mentioned Alphabet Inc. (NASDAQ:GOOG). Here is what the fund said:
“Alphabet Inc. (NASDAQ:GOOG) also detracted from performance despite reporting strong +15% revenue growth (foreign exchange-neutral) in its core search business during the Company’s second quarter. The Company continues to integrate generative AI (gen AI) applications into its largest products that reach billions of users every day. The advertisements that appear above and below this gen AI content, particularly on search results, represents a valuable opportunity for businesses. In addition, the Google subsidiary of Alphabet has been deploying gen AI features that help advertisers easily create ad content and then quickly scale that content across all of Google’s properties and formats. As we have pointed out in the past, Google’s new AI-driven advertising tools and products represent returns on the Company’s early and aggressive investments in AI hardware and application software over the past decade and should lead to significant, sustainable competitive advantages. During the quarter, the District of Columbia ruled that Google violated antitrust law by maintaining a monopoly in the U.S. across its search services and text advertising, specifically through exclusive distribution agreements. Alphabet’s deep competitive advantages go far beyond its distribution agreements, and we believe the Company should be able to maintain its superior return structure, despite the recent legal headwinds.”
