Goldman Sachs AI Stocks: Top 5 Stock Picks

4. Alphabet Inc. (NASDAQ:GOOG)

Goldman Sachs’ Q2 Stake Value: $5.8 billion

Number of Hedge Fund Holders: 152

John Blackledge at TD Cowen holds an Outperform rating and a $140 price target on Alphabet Inc. (NASDAQ:GOOG) shares as of July 13.

Based in Mountain View, California, Alphabet Inc. (NASDAQ:GOOG) is a big tech company that is actively involved in the AI chatbot space with its experimental Bard chatbot, among more.

Alphabet Inc. (NASDAQ:GOOG) was seen in the portfolios of 152 hedge funds in the second quarter, with a total stake value of $18.9 billion.

Giverny Capital Asset Management, LLC said the following about Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2023 investor letter:

“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet Inc. (NASDAQ:GOOG) (8.1% of our model portfolio at the end of June) and Meta (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.

GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.

Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”