4. Alphabet Inc. (NASDAQ:GOOG)
Number of Investors in Q1 2023: 155
Alphabet Inc. (NASDAQ:GOOG)’s Google has always dominated the search engine business racking up billions of dollars every year. Likewise, the company has resorted to generative AI to strengthen its dominance in the segment. The unveiling of the Bard Chatbot underscores how focused the company is on using the new age technology.
With generative AI, Google remains well-positioned to enhance the search and browsing experience online. Similarly, it is testing other innovative AI-powered solutions, like a program that answers questions about medical information. By enhancing its search tool using AI, it should strengthen its revenue stream on search.
Wolfe Research analyst Deepak Mathivanan raised his price target on Alphabet Inc. (NASDAQ:GOOG) to $140 and kept an ‘Outperform’ rating before Q2 earnings. The analyst favors e-commerce stocks with revenue and free cash flow upside. Among mega-caps, firm likes Meta Platforms, Amazon, and Alphabet. Wolfe’s agency checks showed strong digital advertising in Q2 and offline share shift.
Alphabet Inc. (NASDAQ:GOOG) was found in the portfolios of 155 hedge funds in the first quarter, with a total stake value of $18.57 billion.
In its investor letter for the second quarter of 2023, Oakmark Global Select Fund shared the following comment regarding Alphabet Inc. (NASDAQ:GOOG):
“Alphabet Inc. (NASDAQ:GOOG) (U.S.) was the top contributor to the Fund’s performance for the quarter. Alphabet’s first-quarter search revenue growth accelerated slightly sequentially, which was notable given that advertising spending has decreased across the board. Management cited the company’s travel and retail segments for their strong performance in contrast to the declines experienced in the finance and in the media and entertainment businesses. Advertising spending has also stabilized at YouTube, and the focus on “shorts” has driven strong viewership growth. In the near term, YouTube’s investment in shorts may not generate significant revenue, but we believe its profitability will accelerate over time. Alphabet’s cloud business reached GAAP profitability this quarter, moving from a -12% margin this quarter last year to a 3% margin this quarter. On the AI front, Alphabet upgraded Bard to run on its more powerful PaLM language model, and Bard can now assist with coding and software development. CEO Sundar Pichai compared AI’s evolution to the transition from desktop to mobile computing a decade ago and said there is “a lot more to come” in terms of its consumer AI applications. CFO Ruth Porat revised 2023 capital expenditures guidance due to higher spending on data center construction and servers that will support AI developments in consumer products, advertiser tools and the cloud business. Porat reiterated that the company plans to continue to hold expense growth below revenue growth and that Alphabet’s cost-reduction initiatives should bear fruit later this year and into 2024. At Alphabet’s annual developer conference in May, the company showcased an impressive array of new AI-powered consumer tools, which will be rolled out over the course of the year. Investors reacted positively to these presentations, which highlighted the extent of AI innovation occurring at Alphabet.”
