1. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders In Q3 2024: 202
Alphabet Inc. (NASDAQ:GOOGL) is one of the biggest technology conglomerates in the world. Its bread and butter is its search engine and advertising business since 78% of the firm’s H1 2024 revenue came from Search, YouTube, and advertisements. Alphabet Inc. (NASDAQ:GOOGL)’s dominant position in the digital advertising industry has enabled it to become a key player in many of the world’s leading industries and technologies. The firm’s considerable financial resources, as evident through $11 billion in cash and equivalents, allow it to design and develop custom processors and train artificial intelligence models. Alphabet Inc. (NASDAQ:GOOGL)’s Google Cloud business is one of the major players in cloud computing, and it is among the handful of firms in the world with access to a self-developed foundational artificial intelligence model. Yet, despite its considerable presence in these two key industries, Alphabet Inc. (NASDAQ:GOOGL)’s reliance on Search for most of its revenue leaves it vulnerable to government action and the threat of disruption from new entrants utilizing new technologies.
Alphabet Inc. (NASDAQ:GOOGL) is currently busy expanding its local and global AI footprint. Here’s what CEO Sundar Pichai shared in the Q3 2024 earnings call:
“And third, a broad global reach through products and platforms that touch billions of people and customers around the world, creating a virtuous cycle. Let me quickly touch on each of these. We continue to invest in state-of-the-art infrastructure to support our AI efforts from the U.S. to Thailand to Uruguay. We are also making bold clean energy investments, including the world’s first corporate agreement to purchase nuclear energy from multiple small modular reactors, which will enable up to 500 megawatts of new 24/7 carbon-free power. We are also doing important work inside our data centers to drive efficiencies while making significant hardware and model improvements. For example, we shared that since we first began testing AI Overviews, we have lowered machine cost per query significantly.
In 18 months, we reduced cost by more than 90% for these queries through hardware, engineering and technical breakthroughs while doubling the size of our custom Gemini model. And of course, we use and offer our customers a range of AI accelerator options, including multiple classes of NVIDIA GPUs and our own custom-built TPUs. We are now on the sixth generation of TPUs known as Trillium and continue to drive efficiencies and better performance with them. Turning to research. Our team at Google DeepMind continues to drive our leadership. Let me take a moment to congratulate Demis Hassabis and John Jumper on winning the Nobel Prize in chemistry for their work on AlphaFold. This is an extraordinary achievement and underscores the incredible talent we have and how critical our world-leading research is to the modern AI revolution and to our future progress.”
GOOGL is a cyclical stock Morgan Stanley is confident about. While we acknowledge the potential of GOOGL as an investment, 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 GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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