Why This Artificial Intelligence (AI) Stock Is Gaining Attention From Institutional Investors – The Motley Fool
Alphabet is a favorite among a few hedge fund billionaires.
One artificial intelligence (AI) stock that has gained the interest of a lot of institutional investors lately is Alphabet (GOOGL 0.07%) (GOOG 0.02%). The stock was a top-three holding in the funds of several prominent hedge fund billionaires at the end of Q3, including Bill Ackman's Pershing Square Capital, Chase Coleman's Tiger Global Management, and Philippe Laffont's Coatue Management.
It's easy to see why these billionaires have been drawn to Alphabet's stock. The stock was very cheap at the start of 2025, as some investors fretted that AI would pressure the company's core Google search business. Those fears, however, proved to be overblown, and Alphabet has flipped the script to be viewed as one of the best-positioned AI companies moving forward.
Image source: Getty Images.
Alphabet's strength lies in the fact that it has the most complete AI stack. This starts with its Tensor Processing Units (TPUs), which are custom AI chips it developed over a decade ago and have been tightly integrated into its ecosystem and improved upon over the years. While other companies are trying to catch up in the custom AI chip race, Alphabet's TPUs are battle-tested and highly regarded, giving it a structural cost advantage when it comes to running AI workloads. It has even begun to let customers begin to deploy its chips through its Google Cloud cloud computing business, creating another revenue stream.
At the same time, Alphabet has trained its world-class Gemini large language model (LLM) on its chips. Gemini is now considered one of the world's best AI models, and Alphabet has infused its capabilities throughout its products. In addition to its stand-alone app, which has been gaining market share, it's also helping drive growth in Google Search through newer AI-powered features, such as AI Overviews, Lens, and Circle to Search. Perhaps the biggest game changer, though, is AI Mode, which lets users easily toggle between traditional search and an AI chatbot without having to switch apps.
Meanwhile, Alphabet's distribution and ad network advantages remain. Through its ownership of the Chrome browser and Android smartphone operating system, along with a search revenue-sharing deal with Apple, the company is the gateway to the internet for most people. Meanwhile, its massive ad network can help it easily monetize both search and AI chatbot users.
While not the bargain it was a year ago, Alphabet's stock is still reasonably valued, trading at a forward price-to-earnings (P/E) ratio of around 25.5 times 2026 analyst estimates. Given that its AI tech stack advantages should just grow with time, the stock is still a buy at current levels.
Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
One artificial intelligence (AI) stock that has gained the interest of a lot of institutional investors lately is Alphabet (GOOGL 0.07%) (GOOG 0.02%). The stock was a top-three holding in the funds of several prominent hedge fund billionaires at the end of Q3, including Bill Ackman's Pershing Square Capital, Chase Coleman's Tiger Global Management, and Philippe Laffont's Coatue Management.
It's easy to see why these billionaires have been drawn to Alphabet's stock. The stock was very cheap at the start of 2025, as some investors fretted that AI would pressure the company's core Google search business. Those fears, however, proved to be overblown, and Alphabet has flipped the script to be viewed as one of the best-positioned AI companies moving forward.
Image source: Getty Images.
Alphabet's strength lies in the fact that it has the most complete AI stack. This starts with its Tensor Processing Units (TPUs), which are custom AI chips it developed over a decade ago and have been tightly integrated into its ecosystem and improved upon over the years. While other companies are trying to catch up in the custom AI chip race, Alphabet's TPUs are battle-tested and highly regarded, giving it a structural cost advantage when it comes to running AI workloads. It has even begun to let customers begin to deploy its chips through its Google Cloud cloud computing business, creating another revenue stream.
At the same time, Alphabet has trained its world-class Gemini large language model (LLM) on its chips. Gemini is now considered one of the world's best AI models, and Alphabet has infused its capabilities throughout its products. In addition to its stand-alone app, which has been gaining market share, it's also helping drive growth in Google Search through newer AI-powered features, such as AI Overviews, Lens, and Circle to Search. Perhaps the biggest game changer, though, is AI Mode, which lets users easily toggle between traditional search and an AI chatbot without having to switch apps.
Meanwhile, Alphabet's distribution and ad network advantages remain. Through its ownership of the Chrome browser and Android smartphone operating system, along with a search revenue-sharing deal with Apple, the company is the gateway to the internet for most people. Meanwhile, its massive ad network can help it easily monetize both search and AI chatbot users.
While not the bargain it was a year ago, Alphabet's stock is still reasonably valued, trading at a forward price-to-earnings (P/E) ratio of around 25.5 times 2026 analyst estimates. Given that its AI tech stack advantages should just grow with time, the stock is still a buy at current levels.
Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.
Making the world smarter, happier, and richer.
© 1995 – 2026 The Motley Fool. All rights reserved.
Market data powered by Xignite and Polygon.io.
About The Motley Fool
Our Services
Around the Globe
Free Tools
Affiliates & Friends
source
This article was autogenerated from a news feed from CDO TIMES selected high quality news and research sources. There was no editorial review conducted beyond that by CDO TIMES staff. Need help with any of the topics in our articles? Schedule your free CDO TIMES Tech Navigator call today to stay ahead of the curve and gain insider advantages to propel your business!
