We recently published a list of Top 10 AI Stocks on Investors’ Radar These Days. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against other top AI stocks on investors’ radar these days.
The debate around AI systems hitting a “data wall” or plateau is heating up in the tech industry with many arguing that the performance of AI models is not showing signs of further improvement amid a lack of quality inputs, causing scaling issues in the industry.
CNBC’s Deirdre Bosa recently discussed this debate in a program and said:
“All it feels like anyone is talking about right now in tech is this debate over scaling laws and a data wall, which continues to rage in Silicon Valley. This is the idea that more data and bigger models will always lead to better AI, with some arguing that progress has peaked or is starting to plateau. Put another way, it’s a debate over a core assumption in AI that could have massive implications for the industry, from valuations to the GPUs powering it, and of course, the Nvidia story. I was at the Newcomer AI conference yesterday here in San Francisco. It was the theme of the day, with everyone from Scale AI’s Alexander Wang to Anthropic’s Dario Amodei to Databricks’ Ali Ghodsi weighing in.”
Jensen Huang was also asked about the issue of AI systems hitting a data wall and possible scaling issues in a latest earnings call. Here is what he said:
“A foundation model pre-training scaling is intact and it’s continuing. As you know, this is an empirical law, not a fundamental physical law, but the evidence is that it continues to scale. What we’re learning, however, is that it’s not enough that we’ve now discovered two other ways to scale. One is post-training scaling. Of course, the first generation of post-training was reinforcement learning human feedback, but now we have reinforcement learning AI feedback and all forms of synthetic data generated data that assists in post-training scaling.”
Read Huang’s comments in detail here.
Bosa mentioned some other tech leaders pushing back against the idea of AI hitting a data wall and said:
“…..also acknowledge that this alone isn’t enough to push AI further, and progress will come from post-training scaling, which is the development of AI applications on top of existing models. He and others say this will still require massive amounts of compute power.
An open question remains: will it be as much? A helpful way to frame that next phase of AI development is digestion or innovation. Maybe both are possible, but digestion might suggest a pullback on the huge amounts of spending and capital expenditures we’ve seen over the last few years. Innovation, on the other hand, could mean doubling down, with just another phase of development beginning. It’s still very much an open question.”
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For this article we picked 10 AI stocks currently trending on the back of latest analyst ratings and news. 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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 160
Alphabet Inc (NASDAQ:GOOG) is under pressure after two reports. One, OpenAI is reportedly mulling developing a search engine to compete with Google. Two, DoJ plans to seek divestiture of Google Chrome, which is perhaps the crown jewel of Alphabet Inc (NASDAQ:GOOG)’s search business.
Chrome is just a browser. It does not bring any revenue on its own. So why is it so important? Chrome drives Alphabet Inc (NASDAQ:GOOG)’s revenue by sending traffic to its default search engine, which generates income through ads. In Q3 2024, Google Search brought in $49.4B, making up 56% of the company’s total revenue for the quarter. Chrome also helps Alphabet Inc (NASDAQ:GOOG) gather browsing data, improve search relevance, and refine ad targeting, which attracts more advertisers willing to pay for prime ad space. It’s crucial for maintaining Alphabet Inc (NASDAQ:GOOG)’s search dominance, holding around 89% of global search traffic and 50% of the US browser market. Chrome also acts as a gateway to other Alphabet Inc (NASDAQ:GOOG) services like Gmail, YouTube, and Google accounts, boosting user engagement. Removing the seamless integration could hurt users.
However, Alphabet Inc (NASDAQ:GOOG) bulls believe the stock is a buy on the current weakness and call the latest worries around Chrome an overreaction. They believe DoJ will use the Chrome divestiture threat as leverage to push Alphabet Inc (NASDAQ:GOOG) into agreeing to less severe actions, like ending exclusive contracts with device makers such as Apple and Samsung, or opening Chrome to third-party search engines, giving users more choice.
Columbia Seligman Global Technology Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q3 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) shares moved lower during the quarter, as the company was a victim of the rotation out of the technology sector and artificial intelligence-focused companies. In August, a federal judge ruled that Google had violated antitrust laws by engaging in unfair business tactics to dominate the Internet search advertising market. The central aspect of the government’s case against Alphabet was that the company’s $20 billion in annual payments to Apple made Google the default search engine on iPhones. Our team remains bullish on Alphabet’s overall business model.”
Overall, GOOG ranks 4th on our list of top AI stocks on investors’ radar these days. While we acknowledge the potential of GOOG, 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 time frame. 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.
