4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 202
Alphabet Inc. (NASDAQ:GOOGL) is a technology conglomerate with a diverse portfolio of businesses, including Google Search, YouTube, and Google Cloud. In Q3 2024, the company demonstrated an increased demand for its search and cloud services, due to the advancements in AI.
Google Search maintains a 90% global market share and generated ~74% of the company’s total revenue in Q3 2024. Its ongoing investments in AI, which can be highlighted by the Gemini models integrated across its products, position it for long-term growth. By the third quarter, all products with over 2 billion monthly users utilized Gemini models.
The CEO Sundar Pichai noted that AI solutions are enhancing product adoption among existing customers, attracting new clients, and securing larger contracts. He outlined plans to accelerate AI product launches in 2025 and emphasized the potential of the Gemini AI model to reach 500 million users. Gemini 2.0 Flash is now widely available to developers. With AI expected to drive a projected $200 billion market by 2026, the company’s focus on AI innovation solidifies its competitive edge.
Citi’s Ronald Josey has a Buy rating and a $232 price target on Alphabet Inc. (NASDAQ:GOOGL). Google is facing legal challenges from the government over its dominance in online search. While Google disagrees with the court’s decision and plans to appeal, it has proposed a solution to address the concerns. Investments in new technologies, such as Gemini 2, showcase that the company is still focused on innovating and improving its products.
Here’s what Qualivian Investment Partners said regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter, highlighting the company’s strong second-quarter results:
“Alphabet Inc. (NASDAQ:GOOGL): Q2 2024 revenues and EPS beat expectations, with total revenues growing 14%, Search ad revenues growing 14%, YouTube ads growing 13%, and Google Cloud revenues growing 29%. Revenue growth in the quarter constituted a continued sequential improvement from earlier quarters in the year, suggesting a continued rebound in Alphabet’s core business except for YouTube ad revenues, which missed expectations and showed deceleration in the growth rate as compared to Q1 when it grew 21%. Operating margins improved by 310 bps vs. the same quarter last year.
Management continued to highlight developments with their generative AI program, which is seen as a foundational platform with opportunities across their businesses but particularly in search and cloud. However, this comes with material capex investment well ahead of the expected economic benefits from Gen AI, and the level of spending is leading investors to worry about the ROI on that spend for Alphabet, as well as the other hyperscalers (Microsoft and Amazon). We continue to have confidence in Alphabet’s ability to generate strong revenue, earnings, and cash flow growth well above the S&P 500’s in the years to come and view it as a core holding for the long term.”
