We recently published a list of Billionaire George Soros Stock Portfolio: Top 10 Stock Picks. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against other top stock picks in Billionaire George Soros’ portfolio.
The Man Who Broke the Bank of England
When it comes to financial lore, you’d struggle to find an investor who is as controversial as George Soros. With a net worth of $7.2 billion, Soros has made a name for himself by correctly spotting market trends, which has led to millions, if not billions, of dollars in strategic savings or profits. He cemented his reputation in financial legend, for instance, when he famously shorted the British pound in 1992 and made off with $1 billion profit in a single day. Soros is also known for overseeing the Quantum Fund, which from 1970 to 2000 produced an outstanding average yearly return of 30%.
Having founded his hedge fund, Soros Fund Management, back in the 1970s, Soros’ investment philosophy is centered around his concept of “reflexivity”. Soros believes that players in the market can influence the market themselves, causing feedback loops that can cause price deviations. The investor makes use of this idea to single out mispricings in the market to create returns. The best application for this concept is during economic bubbles. According to Soros, “When I see a bubble forming, I rush in to buy, adding fuel to the fire”. Of course, that doesn’t mean one can always hit the bullseye; we saw this during the dot-com era almost 25 years ago where Soros admitted to being beaten by billions of dollars in losses.
Soros Fund Management’s 13F portfolio contained $6.92 billion in securities as of September 30, up from $5.56 billion a quarter earlier. About 9.8% and 7.4% of those securities were in the technology and services sectors, respectively, down from 11.7% and 10.6% from the quarter prior. Healthcare, basic materials, and financials also constituted a sizable portion of the fund’s portfolio as of the third quarter of 2024.
Soros’ Opposition to AI
It’s no surprise to anyone who has followed George Soros over the years that the billionaire has a certain disdain for artificial intelligence. Soros claims that the technology poses a significant threat, especially to what he calls “open societies”, simply because AI can not only produce instruments of surveillance, but it can also be liable in its misuse. In Soros’ ideal world, AI regulations would have to be globally enforceable, though he admits that such a dream might not be realized because of the dynamics of governance across the globe. In a MarketWatch article from 2023, Soros outlined some of his thoughts regarding the technology. Here’s what he wrote:
“We, human beings, are both participants and observers in the world in which we live. As participants we want to change the world in our favor; as observers we want to understand reality as it is. These two objectives interfere with each other. I regard this as an important insight which allows me to distinguish between right and wrong.
AI destroyed this simple schema because it has absolutely nothing to do with reality. AI creates its own reality and when that artificial reality fails to correspond to the real world –which happens quite often — it is discarded as hallucination.
This made me almost instinctively opposed to AI and I wholeheartedly agree with the experts who argue that it needs to be regulated. But AI regulations have to be globally enforceable, because the incentive to cheat is too great; those who evade the regulations gain an unfair advantage.”
Our Methodology
For this article we scanned Soros Fund Management’s Q3 portfolio and chose its top 10 stock picks. The stocks are ranked in ascending order of the fund’s stakes in them.
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:GOOGL)
Soros Fund Management’s stake as of Q3: $86.5 million
Alphabet Inc. (NASDAQ:GOOGL) is a leading tech giant with a diverse portfolio, including Google Services, Google Cloud, and other services. The company offers products such as Google ads, Google Chrome, Search, and YouTube, holding a dominant position in each of these markets.
UBS maintained its Neutral rating on GOOGL shares with a price target of $192 back in November. The firm pointed out the DOJ’s Initial Proposed Final Judgment, which suggested remedies in the wake of a court order that designated Google as a monopoly in the search sector. UBS said the proposed constraints are consistent with past DOJ rules from August and October, which may pose long-term revenue threats to the company. That said, Alphabet Inc. (NASDAQ:GOOG) plans to appeal the ruling and seeks an injunction.
For Q3 2024, GOOGL reported a 15% year-over-year increase in consolidated revenue, reaching $88.3 billion. One of the primary drivers of this growth was the Cloud segment, with revenue surging from 35% year-over-year. This was led primarily by AI infrastructure and GenAI solutions within the Cloud Platform services.
Cooper Investors Global Equities Fund (Hedged) stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q3 2024 investor letter:
“Alphabet Inc.’s (NASDAQ:GOOGL) operating performance remains strong with sales growing 14% in the most recent quarter. Highlights included the ongoing secular growth of digital advertising driving Google search (+14%), YouTube’s continued success as a leading content platform (+13%) and the performance of the Cloud business (+29%). In conjunction with this strong sales momentum, Alphabet’s increased focus on expenses is delivering margin expansion such that Operating Income grew 26%.
Overall, GOOGL ranks 7th on our list of top stock picks in Billionaire George Soros’ portfolio. While we acknowledge the potential of GOOGL, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL 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.