Goldman Sachs’ Best Phase 2 AI Stocks: Top 24 High Conviction AI Stocks

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23. Alphabet Inc. (NASDAQ:GOOGL)

Year To Date Share Price Gain: 17.88%

Number of Hedge Fund Investors in Q2 2024: 216

Alphabet Inc. (NASDAQ:GOOG) is the mega cap technology company that earns most of its revenue through its search engine, Google Search. Its dominance in the global search industry, which sees it operate across all ends from serving as a marketplace for ads to running the ads on its platforms, has enabled Alphabet Inc. (NASDAQ:GOOG) to build a fortress balance sheet. Its cash and equivalents sit at $111 billion which enables the firm to play a leading role in the cloud computing industry. Alphabet Inc. (NASDAQ:GOOG) is a diversified AI company, since not only does it offer AI products and services along with the Gemini APU, but it also offers tensor processing unit (TPU) chips to others to run their AI workloads. One of its biggest TPU customers is Apple, and its AI platform means that Alphabet Inc. (NASDAQ:GOOG) is both an AI enabler and an AI beneficiary.

Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter. Here is what the fund said:

“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”

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