We recently published a list of 10 Best AI Stocks to Buy According to Carolina Panthers Owner Billionaire David Tepper. Since Alphabet Inc Class C (NASDAQ:GOOG) ranks 5th on the list, it deserves a deeper look.
Billionaire David Tepper stands out amongst American hedge fund managers for his two recent moves: his bet on Chinese stocks despite their volatility and underperformance and his early arrival at the AI party.
David Tepper’s passion for investing goes all the way back to his high-school days. He once recalled:
“I remember my dad had made some small investments in a few companies, so I would track them and see how he was doing.”
Tepper bought his first stock when he was in high school — 100 shares of a $2 stock, “but then the whole thing went bankrupt,” he said.
“It was a bad investment, but that didn’t deter me.”
Today, Tepper is worth about $20 billion. He was piling into AI stocks when they were just getting started. This wasn’t a fluke or a one-off success from the billionaire. Data from Bloomberg shows that Tepper has posted annualized returns of 28% for investors, before fees. In 2022, when markets were tumbling amid inflation storm and rising interest rates, Appaloosa returned 12.5%. Tepper’s instincts and grip over financial markets were strong even when he was in his late 20s and 30s, raking in huge profits for Goldman Sachs, which he’d joined in 1985.
Tepper rose to fame at Goldman when his portfolio stood out in the midst of the market crash of 1987.
According to The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, written by Maneet Ahuja, Tepper recalled:
“Going into the crash I had set up my entire portfolio as just short—I had no long positions. I made a fortune during and after the crash,” he says with a chuckle. “It was very cool.” Unfortunately, the rest of the firm didn’t do as well. “I still got a raise but not as much as I should have.”
Tepper’s fund Appaloosa Management has released its latest holdings data and it’s time to see which AI stocks are in the billionaire’s portfolio. 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).
Pixabay/Public Domain
Alphabet Inc (NASDAQ:GOOG)
Billionaire David Tepper’s Stake: $353,083,500
Alphabet Inc Class C (NASDAQ:GOOG) shares slipped recently following reports that OpenAI is working on a web search product called SearchGPT. Before that, the stock fell following earnings despite posting strong numbers. Revenue in the second quarter jumped 14% year over year driven by search and Cloud. At a forward P/E of 22, analysts believe Alphabet Inc Class C (NASDAQ:GOOG) continues to be one of the cheapest AI stocks in the market as its valuation remains depressed amid fears caused by an overreaction.
Despite constant alarms going off about its search business, Alphabet Inc Class C (NASDAQ:GOOG) search revenue jumped about 13.7% in the second quarter year over year. As of the end of June, Google has about 91.06% share of the search engine market, just 1.65% lower than the December 2019 levels. With AI overviews and other search initiatives, Alphabet Inc Class C (NASDAQ:GOOG) will be able to stave off any competitors given its dominance in the market.
Cloud and YouTube are two key strong catalysts for Alphabet Inc Class C (NASDAQ:GOOG) shares. During the second quarter, Alphabet’s Cloud revenue rose 28.8% to $10.35 billion, crushing past analysts’ forecasts of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on the path to reach a $100 billion revenue run-rate from YouTube Ads and Google Cloud by the end of 2024.
Mar Vista Focus strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) reported robust quarterly financials, demonstrating accelerated revenue growth and improved margins from restructuring efforts. The company’s core advertising business is rebounding after a challenging 2022-2023 period, when advertisers curtailed spending due to economic concerns. While this quarter’s exceptional growth rate may not persist, Alphabet’s performance indicates it is likely to exceed our annual projections.
Following Meta’s lead, Alphabet is adopting a more stringent approach to expenses. The company continues to reduce headcount and consolidate teams, aiming to counterbalance the impact of infrastructure investments on profitability. Alphabet’s better-than-expected revenue and earnings underscore both the resilience of its core business and management’s early success in sustainably restructuring the cost base.
Notably, AI advancements are already showing promising results, enhancing consumer engagement, and improving advertiser performance. These developments position Alphabet favorably in an increasingly AI-driven digital landscape.”
Overall, Alphabet Inc Class C (NASDAQ:GOOG) ranks 5th on Insider Monkey’s list titled 10 Best AI Stocks to Buy According to Carolina Panthers Owner Billionaire David Tepper. While we acknowledge the potential of Alphabet Inc Class C (NASDAQ:GOOG), our conviction lies in the belief that 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.