We recently published a list of Top 10 AI Stocks Investors are Talking About in October. Since Alphabet Inc. (NASDAQ:GOOG) ranks 6th on the list, it deserves a deeper look.
Venu Krishna, Barclays head of U.S. equity strategy, said while talking to CNBC in a latest program that he is not revising his S&P 500 year-end projection of 5,600 because he believes stock valuations are “full.”
“If you see what’s happening, numbers (earnings) have been cut sharply going into the end. What is still anchoring the market is big tech, even though their earnings themselves are kind of decelerating. Then seasonality comes into play. October is the weakest month, and you don’t want to get ahead of that.”
Asked whether he does not believe the market really broadened out, Krishna said while there were some signs of market broadening, the “anchor” of the rally remains big tech, which according to him, are just six stocks.
Moving beyond the earnings and valuations debate, another factor still impacting investor sentiment is the Federal Reserve’s next moves.
Talking about the latest Fed minutes released October 9, Wolfe Research’s Stephanie Roth said on CNBC that a “substantial” majority of Fed officials wanted a 50-basis-point rate cut. However, she said in the next meeting, a 50bps rate cut is “off the table.”
For this article we picked 10 AI stocks trending on latest news. With each stock we 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).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Google Cloud (NASDAQ: GOOG)(NASDAQ: GOOGL) outlined a variety of artificial intelligence agent use cases during its Google Gemini at Work event on Tuesday.
“We come away from the keynote with increased conviction in the strength of Google’s enterprise generative AI offerings and their emerging contribution to Google Cloud growth,” said Wedbush analysts, led by Scott Devitt, in an investor note. “Google is actively working with enterprise customers to develop AI agents across a variety of use cases.”
Some of the enterprises highlighted include Snap (SNAP), Volkswagen (OTCPK: VWAGY), Warner Bros. Discovery (WBD), and Best Buy (BBY). The six primary uses of AI agents employed by enterprises include customer agents, employee agents, code agents, data agents, security agents, and creative agents.
Google reported that over 2 million developers are building with Google’s GenAI solutions, and it has seen 36x growth in Gemini API usage on Vertex AI since the beginning of the year. “Google is well positioned to drive adoption of generative AI tools given its AI-optimized compute infrastructure supported by custom silicon, and unmatched breadth of data to develop and train AI models across text, images, and video,” Devitt noted.
Wedbush maintains its Outperform rating on Google with a 12-month price target of $205, about 26% higher than the current stock price.
Despite constant alarms going off about its search business, Alphabet Inc Class C (NASDAQ:GOOG) search revenue jumped about 13.7% in the second quarter year over year. As of the end of June, Google has about 91.06% share of the search engine market, just 1.65% lower than the December 2019 levels. With AI overviews and other search initiatives, Alphabet Inc Class C (NASDAQ:GOOG) will be able to stave off any competitors given its dominance in the market. According to StatCounter report, Bing search engine’s market share only increased from 3.03% in August 2023 to 3.91% in August 2024. This shows MSFT has not been able to make any notable dent in Google’s market share.
Cloud and YouTube are two key strong catalysts for Alphabet Inc Class C (NASDAQ:GOOG) shares. During the second quarter, Alphabet’s Cloud revenue rose 28.8% to $10.35 billion, crushing past analysts’ forecasts of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on the path to reach a $100 billion revenue run-rate from YouTube Ads and Google Cloud by the end of 2024.
Diamond Hill Large Cap Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon, Texas Instruments and Alphabet Inc. (NASDAQ:GOOG). Media and technology company Alphabet also continued delivering strong results in its search, YouTube advertising, YouTube subscription and cloud businesses. Shares rose amid an environment that continues favoring mega-cap technology companies.”
Overall, Alphabet Inc. (NASDAQ:GOOG) ranks 6th on Insider Monkey’s list titled Top 10 AI Stocks Investors are Talking About in October. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG), our conviction lies in the belief that 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.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
