We recently published a list of the top 10 trending AI stocks to watch. Alphabet Inc Class C (NASDAQ:GOOG) ranks No. 3 on our list, so it’s worth taking a closer look.
Wall Street continues to gain momentum during the latest earnings season, with analysts wondering whether we’re still on track for a soft landing. Mohamed El-Erian, Allianz’s chief economic advisor, spoke on CNBC about the possibility of a soft landing and a no-landing. When asked what it would take for the market to realize a no-land scenario, the analyst said:
“I think we need to realize productivity improvements through AI and life sciences as soon as possible, and we need to continue to provide positive shocks to the workforce.And if we can achieve these two things, we will be able to improve productivity from households to businesses to financial markets. You can actually have a perfect, larger, but less active economy for just about anything you can think of.”
However, analysts are not ruling out the possibility of a recession.
“I have a 55% chance of a soft landing and a 30% chance of a recession. Soft landing is the most likely scenario, but it is not the dominant one. Why is it not the dominant one? Because the household sector, Because low-income groups are especially vulnerable, and the Fed’s actions are unpredictable. Think about it, Morgan, in late July, the Fed didn’t cut interest rates because everything seemed to be going well. 50 basis points (bp) before its next meeting. And now there’s talk of cautious cuts. So the Fed needs to be careful.”
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Alphabet Inc. (NASDAQ:GOOG)
Number of hedge fund investors: 165
In April 2023, CIC Wealth Executive Vice President Malcolm Etheridge spoke on CNBC about the threats to Alphabet Inc.’s (NASDAQ:GOOG) search business and Sundar Pichai’s defensive posture regarding AI.
“I feel like Google (Alphabet) will continue to be distracted and trying to keep up with this AI arms race. If Google leans too far into the AI-generated search trends, search will become their only real source of revenue. Even the products they develop are built around getting users to the search bar faster than their competitors’ devices.
This is alarming. If they made a serious move toward incorporating a chatbox feature that would give a single answer to a search query, it would be because Facebook announced it would go completely mobile in 2014, at a time when many were criticizing Mark Zuckerberg. This is because it is the same thing as becoming a Crazy. I don’t think Google and Alphabet have the time to do that and say, “We said so, and we said we have something in the works.”
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So far, analysts’ concerns have proven to be false. why?
Despite constant alarm bells about its search business, Alphabet Inc. Class C (NASDAQ:GOOG) search revenue grew about 13.7% year-over-year in the second quarter. As of the end of June, Google’s search engine market share was approximately 91.06%, just 1.65% lower than the December 2019 level. AI Overview and other search initiatives could help Alphabet Inc Class C (NASDAQ:GOOG) consider its market advantage and keep competitors at bay. According to a report by StatCounter, the market share of Bing search engine only increased from 3.03% in August 2023 to 3.91% in August 2024. This shows that MSFT has not been able to make a noticeable impact on Google’s market share.
Cloud and YouTube are two key powerful catalysts for Alphabet Inc. Class C (NASDAQ:GOOG) stock. Alphabet’s cloud revenue rose 28.8% to $10.35 billion in the second quarter, beating previous analyst estimates of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on track to achieve a $100 billion revenue run rate from YouTube ads and Google Cloud by the end of 2024.
Oakmark Select Fund says this about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2024 investor letter:
“During the quarter, Alphabet Inc. (NASDAQ:GOOG) was the biggest detractor. The U.S.-based communications services company’s stock price was buoyed by Google’s continued monopoly on general search engine services through exclusive distribution agreements. The decline came after a U.S. district court ruled that the company violated Section 2 of the Sherman Act, as previous regulations in the European Union to address similar issues did not significantly erode the company’s market share. “We believe this litigation is unlikely to harm Alphabet’s reputation in the long term. We continue to believe that Alphabet is an attractive investment.”
Overall, Alphabet Inc Class C (NASDAQ:GOOG) ranks #3 on Insider Monkey’s “Top 10 AI Trending Stocks to Watch” list. While we see the potential in Alphabet Inc. Class C (NASDAQ:GOOG), we believe AI stocks are more likely to deliver higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than GOOG but trade at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: Analyst sees new $25 billion ‘opportunity’ in NVIDIA and Jim Cramer recommends these stocks.
Disclosure: None. This article was originally published on Insider Monkey.
