4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is another reputable big tech player on the market, more familiarly known as Google. It is based in Mountain View, California.
Google Search and Google Cloud are some of the top-performing segments operated by Alphabet Inc. (NASDAQ:GOOGL), with the former representing about 57% of the company’s revenue in the second quarter and the latter garnering analyst attention recently for becoming more profitable. However, many investors are more interested in Alphabet Inc. (NASDAQ:GOOGL) because it owns YouTube, a highly successful video platform.
In the second quarter, YouTube generated $8.7 billion in ad revenue alone, up 13% year-over-year. Google Cloud has also seen revenues soar by 29% to over $10 billion in the second quarter – showing the business’ fast pace of growth. In light of all this, the biggest challenge Alphabet Inc. (NASDAQ:GOOGL) seems to be facing is the recent antitrust case it lost against the US government, where the company was called a monopoly.
Many are concerned that Alphabet Inc. (NASDAQ:GOOGL) will be broken up as a result of this ruling. But realistically speaking, this doesn’t seem all that easy to accomplish when you’re dealing with a tech giant. Regardless of what happens in the aftermath, the individual successes of all of Alphabet Inc.’s (NASDAQ:GOOGL) business segments are enough to assure investors of the company’s success and further growth in the future.
We saw 216 hedge funds long Alphabet Inc. (NASDAQ:GOOGL) in the second quarter, with a total stake value of $35.3 billion.
Baron Funds mentioned Alphabet Inc. (NASDAQ:GOOGL) in its second-quarter 2024 investor letter:
“We also added to Alphabet Inc. (NASDAQ:GOOG). The company reported solid financial results with first quarter revenue growth of 15% year-over-year, driven by 14% growth in search, 21% growth in YouTube, and 28% growth in cloud (which accelerated from 26% growth in the fourth quarter). The company has also increased its cost discipline efforts, which drove operating margins to 31.6% (compared to 25% in the first quarter of 2023). With regards to GenAI, while we are cognizant of the potential risks to the dominance of search, we believe that on the range of outcomes, Alphabet remains well positioned through its massive user distribution (9 products with over 1 billion users each), long-standing AI research labs (DeepMind and Google Brain), top AI talent, a solid cloud computing division in Google Cloud, and deep pockets for investing in AI. During the quarter, Alphabet also held its annual I/O conference, where it provided an update on its efforts in AI including: Gemini is now used by 1.5 million developers; model quality is expanding rapidly (e.g., context window is now 2 million tokens of length); the new genomics model, Alphafold 3 can predict structures of molecules and potentially accelerate drug discovery; new TPU6 AI chips has shown a 4.7 times improvement in compute performance compared to the prior generation; and Gemini for workspace is showing early data on a 30% increase in user productivity. Alphabet also has real value in assets such as Waymo, which are not factored into valuation today (and are potentially included at a negative valuation as they currently generate losses, hurting EPS). We continue to believe that the current valuation of Alphabet presents an attractive risk/reward for long-term owners of the business and have therefore increased our position.”
