We recently published a list of Top 10 AI Stocks to Watch In February. In this article, we are going to take a look at where Alphabet (NASDAQ:GOOG) stands against other top AI stocks to watch in February.
Barry Bannister, Stifel’s chief equity strategist, said in a latest program on CNBC that the macroeconomic factors are finally catching up to the AI-led bull market. He expects inflation to remain sticky and no further rate cuts from the Federal Reserve in the short term. The analyst also rejected the notion that the massive tech selloff after the launch of DeepSeek was a buying opportunity.
“Over 30 years ago, we used to joke about how technology was such a displacement event business where new competitors would come in and destroy the entrenched stocks, that it deserved a lower multiple because of that. It’s a short life cycle business that’s got a very short competitive advantage period. But investors forgot about that. They bid up the stocks. The growth relative to value large-cap total return, one divided by the other on a 10-year compound basis, reached the absolute outer limits of the past 90 years. And that exact limit line is exactly where it peaked—the price earnings multiple and the outperformance of growth. So, for us, it’s just a very bubbly market that’s just gotta take some air out of it.”
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For this article, we chose 10 AI stocks currently making moves in the market. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Joe Tigay from Rational Equity Armor Fund said in a latest program on Schwab Network that he likes Alphabet (NASDAQ:GOOG) stock and mentioned the reasons behind his bullish thesis:
“I am very excited about Alphabet. You know, they had a slow start when we went into this AI world. They were offside, they had a false start, they had a terrible rollout of their Bard, I think it was called at the time. They’ve completely reshaped that. I love how they’re currently working with Gemini, they’ve partnered with Apple, and I think they’re fighting very hard with OpenAI to be the LLM leader. I think that’s an interesting spot in the AI world. There’s so much more in the AI world that we’re just scratching the surface of, and we saw their advancements with their quantum computing. I think that’s the type of company, that’s the type of visionaries that are at Google, just looking past this LLM, looking past the current technologies that are out there, and looking for the future. I just think that they are there, and they are so well-positioned to take advantage of all of it. They have the data, they have the video, they have everything. They’re in phones and their own phones and everything else. So yes, I love this company for the short term, I love it for the long term, and I think it’s an integral part of this technology AI breakthrough.”
Alphabet shares slipped following the company’s latest quarterly results. The market was spooked by the massive $75 billion Capex guidance for 2025. However, GOOG bulls believe these investments will pay off. The company needs to spend to maintain its dominance in search. Its Gemini model has an edge over competitors because of the huge ecosystem Alphabet already has. For the end user, it’s easier to switch from traditional search to Geminin instead of moving to a completely new app like ChatGPT or Perplexity. So far AI competition hasn’t dented the company’s search revenue.
In the fourth quarter, Alphabet’s operating margin rose 32%. YouTube ad revenue jumped 14% and Cloud revenue skyrocketed by 30.1%. Google raked in $12.8 billion in FCF, marking a roughly 215% growth compared to the same period last year, despite heavy investments in AI. The stock has a forward (2026) P/E ratio of 20.8x, which makes it about 22% cheaper than the average company in its sector.
Montaka Global Investments stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q4 2024 investor letter:
“While the bulk of Montaka’s portfolio exposures continued to remain relatively stable over the December quarter, we did undertake some modest hands-on portfolio management in the tail-end of the portfolio.
We exited three of Montaka’s smallest portfolio names. While we see long-term upside in all of these names, we see more upside elsewhere. Hence, we reallocated these proceeds to (i) scale up Montaka’s investment in Alphabet Inc. (NASDAQ:GOOG) on increased probabilities that its advantages in Google Search are strengthening (not to mention the group’s numerous growth options increasing in probability – from YouTube, to Waymo, and even quantum computing); and (ii) to establish an initial ‘outlier’ position in database software provider, MongoDB (MDB).”
Overall, GOOG ranks 3rd on our list of top AI stocks to watch in February. While we acknowledge the potential of GOOG, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
