We recently published a list of Top 10 Trending AI Stocks on Latest Analyst Ratings and News. Since Alphabet Inc (NASDAQ:GOOG) ranks 4th on the list, it deserves a deeper look.
AI stocks have pulled back considerably over the past few weeks and analysts believe this is exactly the healthy correction long-term investors were looking for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said that AI stocks have stabilized at levels they can sustain for the rest of the year. The analyst said technical indicators now show AI stocks have gone from overbought to oversold territory.
“Now that positions have been unwound, there’s an opportunity for traders to take positions,” Sluymer reportedly said.
Many others agree with Sluymer. Dan Ives of Wedbush reiterated his view that we are still in the early stages of the AI bull market in a latest program on CNBC.
“If you look at what we’ve seen from AI revolution to broader tech, it’s been strong from an earnings perspective. And the growth scare that we saw, it’s just a bump in the road to what I believe is the fourth industrial revolution playing out,” Ives said.
For this article, we picked up 10 AI stocks that are making waves on the back of latest earnings, analyst ratings or important industry news. With each company, 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).
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Alphabet Inc (NASDAQ:GOOG)
Number of Hedge Fund Investors: 165
Alphabet Inc Class C (NASDAQ:GOOG) is in the spotlight after the company revealed Pixel 9 phones which have an on-device artificial intelligent assistant Gemini Nano. However, the shares are under pressure amid reports the US Justice Department is considering breaking up Google. Jefferies said in a fresh note that the market is assigning zero value to Google’s Cloud and Hardware divisions. Jeffries analysts believe Alphabet Inc Class C (NASDAQ:GOOG) smartphone and device market share remains minimal, making it tough to gain traction. However, they see generative AI as a potential equalizer. Jefferies maintained its Buy rating on Google, citing Gemini as the most personalized generative AI assistant on the market.
Jefferies also emphasized that Google and Meta Platforms (META) are well-positioned to capitalize on the consumer AI boom.
Alphabet Inc Class C (NASDAQ:GOOG) shares slipped recently following reports that OpenAI is working on a web search product called SearchGPT. Before that, the stock fell following earnings despite posting strong numbers. Revenue in the second quarter jumped 14% year over year driven by search and Cloud. At a forward P/E of 22, analysts believe Alphabet Inc Class C (NASDAQ:GOOG) continues to be one of the cheapest AI stocks in the market as its valuation remains depressed amid fears caused by an overreaction.
Despite constant alarms going off about its search business, Alphabet Inc Class C (NASDAQ:GOOG) search revenue jumped about 13.7% in the second quarter year over year. As of the end of June, Google has about 91.06% share of the search engine market, just 1.65% lower than the December 2019 levels. With AI overviews and other search initiatives, Alphabet Inc Class C (NASDAQ:GOOG) will be able to stave off any competitors given its dominance in the market.
Cloud and YouTube are two key strong catalysts for Alphabet Inc Class C (NASDAQ:GOOG) shares. During the second quarter, Alphabet’s Cloud revenue rose 28.8% to $10.35 billion, crushing past analysts’ forecasts of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on the path to reach a $100 billion revenue run-rate from YouTube Ads and Google Cloud by the end of 2024.
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, Alphabet Inc (NASDAQ:GOOG) ranks 4th on Insider Monkey’s list titled Top 10 Trending AI Stocks on Latest Analyst Ratings and News. While we acknowledge the potential of Alphabet Inc(NASDAQ:GOOG), 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 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.
