1. Alphabet Inc. (NASDAQ:GOOGL)
Analyst Upside as of October 22, 2024: 24.3%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the biggest technology companies in the world that ranks first on our list of the best FAANG stocks to buy according to hedge funds. It owns a range of products, including Google Search, Google Maps, YouTube, Google Cloud, and Wyamo.
On October 14, the company signed an agreement to purchase nuclear energy from small modular reactors to be developed by Kairos Power. The first phase of work is expected to bring small modular reactors online by 2030, followed by consequent developments through 2035. The deal will promise 500 megawatts of carbon-free energy to electricity grids in the United States.
Alphabet’s (NASDAQ:GOOGL) performance in Q2 2024 was largely driven by its growing momentum in search and cloud. The company logged nearly $85 billion in revenue, of which search and cloud exceeded $10 billion for the first time in quarterly revenue. In addition to that, the company’s processing units make up nearly 20% of the market, and market share is likely to expand as advancements continue.
To shed light on Alphabet’s (NASDAQ:GOOGL) position, Angelo Zino, CFRA Research Senior Equity Analyst, appeared in an interview on Yahoo Finance. Zino suggests that the company had been in beta mode for a long time and is now advancing towards AI at full speed. He adds that the company is excelling in every aspect of AI and is the ultimate consumer company, functioning as the internet.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter“
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
Overall, GOOGL ranks first among the 8 best FAANG stocks to buy according to analysts. While we acknowledge the potential of technology and cloud companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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