Forget Magnificent 7: Analysts are Talking About ‘Big 10’ AI Stocks in 2024

5. Alphabet Inc (NASDAQ:GOOG)

Number of Hedge Fund Investors: 165

BofA also named Alphabet Inc. (NASDAQ:GOOG) as one of the Big 10 AI stocks that are contributing to the overall market returns so far. The stock has gained about 28 so far this year.

Another latest story around Alphabet Inc Class C (NASDAQ:GOOG) making waves is Bank of America’s industry checks in the search engine market which found that Alphabet is still the market leader, with a whopping 95% share, with Bing’s search coming in at just 0.7%.

BofA’s Justin Post said Alphabet Inc’s (NASDAQ:GOOG) AI Overviews had a role to play here:

 “After a consecutive eight months of decline, Google’s US Search market share increased m/m in May, which could suggest AI Overviews are aiding query growth and usage,” Post said.

Alphabet Inc. (NASDAQ:GOOG) bulls believe the market is not incorporating Alphabet Inc.’s (NASDAQ:GOOG) growth in Cloud, Other Bets, Video and other high growth initiatives. The stock is trading 20x Alphabet Inc.’s (NASDAQ:GOOG) 2025 EPS estimate of $8.57. This multiple makes the stock look attractively valued since the Wall Street expects Alphabet Inc. (NASDAQ:GOOG) earnings to grow by 13.40% in 2025 and by 19% over the past five years on a per annum basis.

Lakehouse Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its April 2024 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) delivered a strong quarterly result that came in well ahead of analysts’ expectations. Revenue grew 15.4% (16.0% constant currency) to $80.5 billion and operating income grew 46.0% to $25.5 billion. Revenue growth accelerated across Search, YouTube Ads, and Google Cloud, all whilst the company delivered its highest operating margin since 2021 – showing meaningful progress in the company’s efforts to durably re-work their cost structure. On the Generative AI front, management emphasised the company’s infrastructure advantages including 5th generation TPUs(chips developed by Google specifically for AI training and inference), high performance data centre architecture, and AI models that are 100x more efficient versus 18 months ago. Overall, we believe that Alphabet is well placed for the AI opportunity ahead and still has significant latent earnings power. When combined with a relatively undemanding valuation of 21x forward net profit and over $100 billion of cash on the balance sheet, it’s not hard to see why we remain positive on the range of outcomes in the years ahead.”