12 Best Quality Stocks to Invest in Now

3. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 234

Alphabet Inc. (NASDAQ:GOOGL)’s aggressive AI integration throughout its product lineup possesses the potential to significantly improve user experiences and establish new revenue opportunities. In the cloud segment, Alphabet Inc. (NASDAQ:GOOGL)’s AI-powered solutions are expected to differentiate Google Cloud Platform from competitors, which can help attract more enterprise customers and fuel revenue growth. Its AI advancements are expected to result in new product categories and services, resulting in additional revenue streams over and above traditional advertising.

Morningstar sees the company’s full-stack approach to AI—including infrastructure, software, applications, and ads—as a strong long-term strategy. On the generative AI side, the firm remains optimistic about Alphabet Inc. (NASDAQ:GOOGL)’s ability to leverage the video and image generation models (Veo and Imagen) to empower creators on YouTube to create/edit the engaging content. Apart from offering creators with numerous tools to generate content, Alphabet Inc. (NASDAQ:GOOGL)’s investments in AI can improve the advertising business through better ad targeting, content recommendations, and ad pricing.

Qualivian Investment Partners, an investment partnership focused on long-only public equities, published the Q3 2024 investor letter. Here is what the fund said:

“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.”