5 Best Engineering Stocks to Buy Now

2. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 209

Alphabet Inc. (NASDAQ:GOOG) is a technology holding company with subsidiaries such as Google LLC, DeepMind, Calico Life Sciences LLC, etc. which rely heavily on software, machine learning, and research engineers.

On March 28, the European Commission announced that it has given approval to Alphabet Inc. (NASDAQ:GOOG)’s subsidiary, Google, to purchase the Croatian math app, Photomath, which has more than 300 million downloads.

On April 25, Alphabet Inc. (NASDAQ:GOOG) released its first quarter 2023 result where the reported EPS was $1.17, up from the $1.05 EPS of the last quarter. The revenue beat the estimates of $68.8 billion as it increased by 2.6% YoY to $69.8 billion.

Alphabet Inc. (NASDAQ:GOOG) was highlighted in Polen Capital’s first-quarter 2023 investor letter. Here is what it said:

“One area we are watching regarding Alphabet Inc. (NASDAQ:GOOG) and Adobe is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.

As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”