10 Stocks That Will Benefit From AI

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders In Q3 2024: 202

Alphabet Inc. (NASDAQ:GOOGL) is one of the biggest technology companies in the world. However, even though the firm has considerable resources that have enabled it to establish a foothold in the AI market through computing resources and foundational AI software, the stock is up a weak 25% year-to-date. Part of the reason behind the muted performance is Alphabet Inc. (NASDAQ:GOOGL)’s reliance on the search engine industry for its bread and butter. As of H1 2024, 57% of the firm’s revenue came from its Search business, and 2024 has seen Alphabet Inc. (NASDAQ:GOOGL) on the radar of the Justice Department for its search engine dominance. However, the firm enjoys a sizable moat in the AI industry as its Bard foundational AI model allows it to build AI services, and its TPU chips enable it to rent AI computing capacity to other companies.

Alluvium Asset Management mentioned Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter. Here is what the fund said:

Alphabet Inc. (NASDAQ:GOOG), ie Google/YouTube, having returned 20.8% in the June quarter, gave a fair bit of that back by falling 8.8%. Its results seemed pretty positive, and appeared to beat expectations. Management claims its AI integration into its search business is working well, and the margin expansion from costs out is expected to continue. Market chatter suggests that the selloff stems from concerns about the high capital spending on servers and data center equipment. Alphabet has made it clear that this spending is necessary, and somewhat defensive as it can’t risk losing the AI war (a “build it, and they will come” approach). Also, the new Department of Justice case against it probably did not help matters. Nonetheless, we saw no need to adjust our estimates. We wrote last quarter that it traded at a premium to our valuation, but not so much as to warrant selling. With the share price falling and the premium reducing, our view is unchanged. It represents 4.4% of the Fund.”