3. Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Josh Brown, CEO at Ritholtz Wealth Management, explained in a latest program on CNBC why he sold his entire position in Alphabet Inc (NASDAQ:GOOG). The analyst believes Alphabet Inc (NASDAQ:GOOG) will be “fine” but the company is losing its position of strength:
“It’s never had to compete the way that it does now and younger generations are jumping literally right into ChatGPT when they want to know something. They’re not looking for blue links and sponsored links and ads—they look, they just want the answer. And so like Google’s going to have to come up with an answer to that. And I think that’s reflected in the multiple that the stock now sells at. I think other people understand that this is not a unique insight to me. I think it’s gonna be a defensive year and I think, you know, when you look at who is most reliant on advertising revenue amongst large cap tech, it’s really Meta and it’s and it’s Alphabet. And arguably the Meta moat around Instagram is stronger than the Google moat around Google Search. So I think it’s just that simple.”
Alphabet impressed Wall Street with its latest quarterly results and threw water on search business-related concerns. Google posted 12% top-line growth. Google Search & Other grew just under 10% year over year. The company holds $85 billion in net cash and marketable securities, plus an additional $50 million in long-term investments. That means about 4% of its market cap is backed by net cash.
Despite key threats, Google is in a strong position to win in the AI search onslaught. Why? Its Gemini model has an edge over competitors because of the huge ecosystem Alphabet already has. For the end user, it’s easier to switch from traditional search to Gemini instead of moving to a completely new app like ChatGPT or Perplexity. So far, AI competition hasn’t dented the company’s search revenue.
The market has been ignoring Alphabet Inc (NASDAQ:GOOGL)’s key secondary businesses and the stock remains undervalued despite concerns around AI search and regulatory onslaught.
Alphabet Inc (NASDAQ:GOOGL)’s secondary ventures in AI, autonomous driving, and other areas are making solid progress, especially in the Waymo robotaxi segment. Waymo has shown notable progress. Waymo vehicles now average about 30.6 autonomous rides per day—substantially higher than Uber’s average of 4.18 rides per driver daily, based on Uber’s 31 million daily trips and 7.4 million drivers last quarter. This performance underscores Waymo’s competitive edge in autonomous ride volume compared to traditional ride-hailing.
Wedgewood Partners stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) also detracted from performance during the quarter, despite of +13% growth in its core search business and over +20% growth in segment income for Google Services. The Company’s search results are beginning to beneit from the addition of “GenAI” (generative arti icial intelligence) responses being added, which monetize at a nearly similar rate as traditional search results do. Alphabet’s Google subsidiary serves billions of users per day, so it is no mean feat to be able to offer GenAI to users free of charge. Google has long been at the forefront of AI hardware and software R&D, irst rolling out its Tensor Processing Units (TPU) to run machine-learning operations across massive datasets almost a decade ago. The Company should be able to continue to drive growth thanks to these large long-term investments in AI and other technical software and infrastructure.”
