We recently published a list of Top 10 Buzzing AI Stocks to Watch Now. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against other top buzzing AI stocks to watch now.
Doug Clinton, Deepwater Asset Management co-founder, said in a latest program on CNBC that the AI trade is still intact but the market is going through a period of “doubt” and many major AI stocks have lost their momentum.
“The vibe has shifted, and I think investors, more broadly, almost want to believe the AI trade is over. They’re looking for evidence, reasons to doubt. That’s the hard part for this trade right now—momentum has lost its momentum. From our perspective, the AI trade is still real. I don’t think this boom is over; I still see two to four years ahead. But in every technology-driven boom, we go through periods of doubt. That’s a healthy part of the cycle, and we just need to work through it.”
When asked about high valuations, the analyst said many of the AI stocks have “reasonable” valuations and upside.
“If you look at the hyperscalers, I think their valuations are still largely reasonable, even though they make up a big share of the market, which concerns some investors. We’re talking about mid-20s PEs for them. Some of the more growth-driven momentum names still have upside. Their multiples look expensive now, but as they continue to grow—and that’s the key question—those multiples will actually appear higher now than they will in the future.”
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For this article, we picked 10 AI stocks the market is talking about these days. 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 373.4% since May 2014, beating its benchmark by 218 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: 174
Jim Cramer in a latest program on CNBC said he’s been selling Alphabet Inc. (NASDAQ:GOOG) shares at his investing club and mentioned some reasons for his bearish outlook:
“I mean, people know members of my club, they know I’ve been selling it down and selling it down and selling it down. Would it be the first one that I leave of the mag? Yeah, except for it does sell only for 20 times earnings. But I think they really got to rethink what their game plan is here because I feel like Gemini competes with Google search, and the thing is, the ads are endless, and they don’t know how to monitor YouTube.”
Alphabet Inc. (NASDAQ:GOOG) shares slipped following the company’s latest quarterly results. The market was spooked by the massive $75 billion Capex guidance for 2025. However, Alphabet Inc. (NASDAQ:GOOG) bulls believe these investments will pay off. The company needs to spend to maintain its dominance in search. Its Gemini model has an edge over competitors because of the huge ecosystem Alphabet already has. For the end user, it’s easier to switch from traditional search to Geminin instead of moving to a completely new app like ChatGPT or Perplexity. So far AI competition hasn’t dented the company’s search revenue.
In the fourth quarter, Alphabet’s operating margin rose 32%. YouTube ad revenue jumped 14% and Cloud revenue skyrocketed by 30.1%. Google raked in $12.8 billion in FCF, marking a roughly 215% growth compared to the same period last year, despite heavy investments in AI. The stock has a forward (2026) P/E ratio of 20.8x, which makes it about 22% cheaper than the average company in its sector.
Bretton Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q4 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) was the major contributor for the quarter, adding 1.3%. Alphabet’s stock followed up a strong 2023 with another strong year, adding 2.7% to the fund as our top contributor.
Alphabet’s revenue in 2024 was $350 billion, which was $43 billion more than the previous year. That’s the equivalent of adding the entire revenue of a company like Coca-Cola, Oracle, Starbucks, or our very own Visa in a single year. Users’ demand for more internet video and information—and the demand for advertisers to get in front of them is massive and still growing fast. YouTube is the world’s most-watched streaming video platform and accounts for 10% of Americans’ time in front of a TV, more than any traditional TV channel.
Despite growing much faster than the average company, Alphabet continues to trade at roughly the same price-to-earnings multiple as the rest of the market. Earnings per share grew 39% last year, and we expect it will grow in the mid-teens for the next few years. If it comes anywhere close to that, the shares today are a bargain…”(Click here to read the full text)
Overall, GOOG ranks 4th on our list of top buzzing AI stocks to watch now. 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.
