We recently published a list of Top 10 Trending AI Stocks to Watch in November. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against other trending AI stocks to watch in November.
Amid soaring valuations of AI stocks, beginner investors keep wondering whether they are too late to the AI party. However, investing experts believe that opportunities abound in the AI space because of the nature of this technological revolution.
While talking to Wall Street Journal during the WSJ Tech Live Conference, venture capitalist Martin Casado, a general partner at Andreessen Horowitz, explained why he believes there is no such thing as “too late” when it comes to AI for now.
“When it comes to AI, it really feels like the marginal cost of language, reasoning and creation are going to zero. And if that’s the case, this is a supercycle. And if that’s the case, we’ve got decades. So there’s no “too late.” In that sense, we’re still very, very early.”
The AI revolution is quickly entering the phase where we are seeing real-life use cases as AI is helping companies significantly reduce costs and increase efficiency. According to a detailed report published by Benesch’s AI Commission, an AI-based tool that monitors real-time data from electronic medical records reduced unexpected deaths in hospitalized internal medicine patients by 26%.
Casado also talked about the usability of AI models for actual problem-solving:
“Everybody looks at the OpenAIs. But as far as value creation and integration, if you look at all the private companies, the smaller companies that are building their own smaller models, they are some of the fastest-growing companies we’ve seen in the history of the industry.”
Also Read 10 Best Healthcare Stocks to Buy According to Hedge Funds and 10 Best Mid-Cap Healthcare Stocks to Buy Now.
For this article we picked 10 AI stocks trending on latest news and earnings. With each stock we have 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 user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Alphabet (NASDAQ:GOOGL) reported strong quarterly results recently. The results show that the market has been ignoring the company’s key secondary businesses and the stock remains undervalued despite concerns around AI search and regulatory onslaught.
Google’s secondary ventures in AI, autonomous driving, and other areas are making solid progress, especially in the Waymo robotaxi segment. Currently, Google’s stock trades below 20 times forward earnings, offering potential upside as EPS and other financial metrics strengthen in coming years. For next year, the consensus EPS estimate sits around $9. However, Google has consistently beaten projections, delivering $7.54 in trailing twelve-month EPS compared to the expected $6.79—a roughly 11% outperformance.
With the 2025 EPS forecast at around $9, Alphabet (NASDAQ:GOOGL) could realistically achieve earnings closer to $10 if it maintains its historical outperformance rate. At a projected $10 EPS, Google’s forward P/E multiple would be approximately 17, a relatively low valuation for a diversified market leader.
What are the key drivers for Alphabet (NASDAQ:GOOGL)?
The company remains on track to reach a $100 billion revenue run rate from YouTube Ads and Google Cloud by the end of 2024. In its autonomous driving division, Waymo has shown notable progress, with paid autonomous rides growing 200% quarter-over-quarter to 150,000 weekly rides as of late October, thanks to a fleet of 700 vehicles in service since August.
This growth is significant: Waymo vehicles now average about 30.6 autonomous rides per day—substantially higher than Uber’s average of 4.18 rides per driver daily, based on Uber’s 31 million daily trips and 7.4 million drivers last quarter. This performance underscores Waymo’s competitive edge in autonomous ride volume compared to traditional ride-hailing.
In the third quarter, Google’s Search & Other segment saw a 12.2% year-over-year revenue increase, rising from $44.03 billion to $49.39 billion. YouTube advertising also performed well, with revenue up 12.2% to $8.92 billion from $7.95 billion. Meanwhile, Google’s subscriptions, platforms, and devices revenue grew even more sharply, surging 27.8% from $8.34 billion to $10.66 billion.
Google Cloud has been expanding steadily, with revenue climbing from $13.06 billion in 2020 to $33.09 billion in 2023. Notably, Google Cloud turned profitable for the first time in 2023, posting $1.72 billion in operating profit—a significant improvement from a $5.61 billion loss in 2020. This segment’s performance continues to strengthen, with the latest quarterly revenue reaching $11.35 billion, up 35% from $8.41 billion in the same period last year.
Oakmark Select Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q3 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) was the top detractor during the quarter. The U.S.-based communication services company’s stock price fell after a U.S. District Court ruled that Google violated Section 2 of the Sherman Act by maintaining a monopoly in general search engine services via exclusive distribution agreements. We think this case is unlikely to hurt Alphabet’s valuation over the long term as regulations previously en[1]acted in the European Union to address similar issues did not materially erode the company’s market share. We continue to believe that Alphabet is an attractive investment.”
Overall, GOOG ranks 6th on our list of trending AI stocks to watch in November. While we acknowledge the potential of GOOG, our conviction lies in the belief that under the radar 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.
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Disclosure: None. This article is originally published at Insider Monkey.
