Wednesday, December 18, 2024

Alphabet Inc. (GOOG): Google’s AI Investments Paying Off

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We recently compiled a list of the 10 Buzzing AI Stocks According to Goldman Sachs. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOG) stands against the other buzzing AI stocks.

The Goldman Sachs Communacopia + Technology Conference 2024, held earlier this month, brought several significant updates on the technology sector for investors, particularly focusing on innovation and financial growth across growth industries. Key discussions revolved around energy-efficient computing, artificial intelligence (AI), and advanced semiconductor technologies, signaling critical transformations in tech and telecommunications. At the conference, companies working in the tech universe outlined their strategic outlooks, emphasizing the role of energy-efficient computing in driving semiconductor growth, with industries like AI, IoT, robotics, and autonomous vehicles fueling multi-trillion-dollar shifts.

Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.

One of the highlights of the conference was the appearance of NVIDIA CEO Jensen Huang, who appeared alongside Goldman Sachs CEO David Solomon to discuss the AI industry in great detail. Quizzed about the recent US export controls on chips to China and the rise in geopolitical tensions potentially harming supplies, Huang outlined that his company was confident that if Taiwan Semiconductor Manufacturing Company, the Taiwan-based leading supplier of advanced AI chips to NVIDIA, was compromised, the chip supply would continue, even though it would not be as good. Huang stressed that NVIDIA possessed enough intellectual property to transfer chip production from one plant to another, if need be.

NVIDIA has lost more than 15% of market capitalization since it issued third quarter guidance numbers that raised worries about slowing earnings growth. In particular, there were concerns about the concentration of hyperscalers in the NVIDIA business model, with four large customers representing nearly half of the revenue of the firm in relation to the AI boom. Following the appearance of Huang at the conference, Goldman Sachs semiconductor analyst Toshiya Hari reiterated a Buy rating on the stock, backing the company to pick up sales in the coming months as demand for accelerated computing continued to be really strong and broadened into enterprise and sovereign states.

Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and AI News You Should Not Have Missed.

Our Methodology

For this article, we selected AI stocks by combing through the proceedings of the Goldman Sachs 2024 Communacopia and Technology Conference. These stocks are also popular among hedge funds. 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 Holders: 165

Alphabet Inc. (NASDAQ:GOOG) is a California-based technology company that owns and runs the internet search engine Google. Thomas Kurian, the CEO of Google Cloud, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting how his company had been way ahead of the others in building AI infrastructure over the past decade. Kurian underlined that these investments were now starting to bear fruit. For example, he revealed that 90% of AI unicorns run on cloud services offered by Google for training and inference. 60% of all AI funded start-ups ever use AI infrastructure developed by Google for training or inference.

Kurian, who was at software firm Oracle before joining Alphabet Inc. (NASDAQ:GOOG), added that traditional companies were also now building both high-performance and generative AI models on the Google Cloud. Kurian gave the example of carmaker Ford Motor Company, detailing that Ford was using the deep learning technology of Google to build simulations for wind tunnel and for virtual wind tunnel simulation, replacing a traditional approach called computational fluid dynamics.

Overall GOOG ranks 4th among the buzzing AI stocks to buy according to Goldman Sachs. While we acknowledge the potential of GOOG as an investment, our conviction lies in the belief that some 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.

 

READ NEXT: Michael Burry Is Selling These Stocks and Jim Cramer is Recommending These Stocks.

 

Disclosure: None. This article is originally published at Insider Monkey.

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