We recently compiled a list of the Jim Cramer’s Hottest 10 Stock Picks. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against Jim Cramer’s other stock picks.
In a recent episode of Mad Money, Jim Cramer talked about what he sees as Wall Street’s biggest oversights this earnings season, especially on a day when the Dow dropped 141 points, and the NASDAQ advanced 0.2%. Cramer highlighted the misleading narratives surrounding the impact of GLP-1 drugs on food and beverage companies, the reluctance to lower prices post-pandemic, the skepticism around AI investments, and the persistent belief that Intel remains dominant in the tech sector.
Cramer argues that if companies were more honest about their changing situations, they would gain credibility and potentially boost their stock prices. Instead, by withholding important details, they leave investors confused and more likely to make poor decisions.
“If companies just own up to their own changing circumstances, things would be so much easier for everybody. But who wants to admit mistakes? They earn a lot of credibility for themselves leading the higher stock prices down the line, instead their stocks languish as investors try to assess what’s really going on and they presume the worst not the best.” said Cramer.
In a time filled with so much misinformation, Cramer emphasized how easy it is to be misled and underscored the need to recognize these gaps. According to Cramer, despite approximately 20 million Americans reportedly using GLP-1 weight loss and diabetes drugs, food and beverage companies refuse to acknowledge any negative impact of these medications. They won’t even suggest it. Cramer argues that their denial of the effects of GLP-1 drugs is simply untrue.
“We know that people eat much less when they take these GLP-1s and consume less snack food because it tamps down on cravings. …These drugs are incredibly powerful. The idea they aren’t doing damage to the snack food companies is insane.”
Cramer commented on the rising prices, stating that most companies see no need to lower them, despite significant hikes during the pandemic. He pointed out that airlines, which have consistently underperformed, refuse to reduce fares, behaving as if the price hikes never happened.
“In the airlines, there are endless underperformers, they simply wouldn’t roll back prices, they act as if they didn’t even take them up in the first place.”
The same goes for hotels and entertainment venues, which sharply increased prices during the pandemic and now resist lowering them, even as demand forecasts decline. Cramer also noted that many restaurants either claim their price hikes haven’t hurt sales or refuse to acknowledge the need to roll back prices.
“They raised prices drastically during the pandemic. They won’t cap the raising prices too much even as the forecast is coming down hard.”
Discussing AI, Cramer strongly disagrees with Wall Street’s claim that AI investments are a waste of money. He points out that many believe big companies spending heavily on AI-related video chips aren’t seeing any significant returns, and are only investing to keep up with competitors (see 33 Most Important AI Companies You Should Pay Attention To).
“We’re constantly being told that none of the big companies spending a fortune in video chips for AI has seen any meaningful return on that investment. They’re only doing it to prevent their competitors from getting an edge. That’s what we keep on hearing. That’s absurd!”
Cramer also challenged the common belief that INTC remains a leader in its sector. He dismissed claims that the company is poised for a major comeback, particularly in data centers, and that it has a chip capable of rivaling its competitors’ dominance. He pointed out that the company’s financial health tells a different story, citing the company’s decision to cut its dividend last year and suspend the remainder this year. According to Cramer, these actions don’t signal dominance, and he warned that this is not the same semiconductor company it once was, despite what the company might claim.
“I keep hearing that Intel’s gonna make a huge comeback that is catching up the others in the data center. That the data center has an Nvidia killer in GE-3. That it’s using the chips to sack money from you and further it’s dominance. Dream on! Have you seen Intel’s balance sheet? Can you read one? Do you think a company that cut its dividend last year and then suspends what was left of it this year in order to assert its dominance?! Look, this is not the Intel of old even though we want it to be. Despite Intel’s protestations, I wouldn’t want to be Intel’s partner.”
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Investors:165
Jim Cramer pointed out that Alphabet Inc. (NASDAQ:GOOG) isn’t just purchasing video chips for AI out of general concern about competition. Instead, they’re particularly worried that Meta might overtake them, and Cramer believes this concern is justified.
“Google aren’t buying because they’re worried that the other guys might do something. They’re specifically worried that Meta is going to catch and pass them and they should be.”
Alphabet Inc. (NASDAQ:GOOG)’s leadership in artificial intelligence (AI), along with its seamless integration of AI into its products—ranging from search and advertising to cloud services and hardware—positions the company for sustained growth. The stability of Alphabet Inc. (NASDAQ:GOOG)’s financial health is underpinned by its search advertising, which continues to be a major revenue source.
Furthermore, Alphabet Inc. (NASDAQ:GOOG)’s extensive ecosystem, including Android, Chrome, Google Maps, and YouTube, enhances user engagement and drives revenue growth through its interconnected services. In Q2 2024, Alphabet Inc. (NASDAQ:GOOG) reported $85 billion in revenue, a 14% year-over-year increase, largely driven by a 29% rise in Google Cloud revenue to $10.35 billion.
Cooper Investors Global Equities Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter:
“Unsurprisingly the portfolio’s best performers in the very short term reflect this pattern, having narrowed to those most obviously exposed to the AI story – TSMC and Alphabet Inc. (NASDAQ:GOOG). While the portfolio has owned semiconductor companies for years it remains diversified and is underweight the group from an active risk perspective, dragging on relative performance in the last six months. The portfolio is currently positioned to take advantage of the Value Latency we see in smaller sized companies, and the performance of the quarter has been more aligned with those factors.
While this positioning is painful in the short-term, we see considerable embedded value in our portfolio. We also see considerable risks and uncertainties existing in the AI theme that are not reflected in the Value Latency on offer in many stocks that have surged.
Returning to the AI story, today the portfolio has around 10% of capital invested across TSMC and Alphabet. Meantime, Alphabet has multiple value levers to pull across AI-augmented search, YouTube (now the ‘must-have’ streaming platform for young people) and Google Cloud.”
Overall GOOG ranks 4th on our list of Jim Cramer’s stock picks. While we acknowledge the potential of GOOG as an investment, 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.