We recently published a list of 15 AI Stocks for Sale. In this article, we’ll take a look at where Alphabet Inc. (NASDAQ: GOOG) ranks in relation to other AI stocks on sale.
Big Tech: the best performing sector of the second quarter?
Big Tech, particularly artificial intelligence, is the sector that many are starting to see as the best performing sector of the market in the second quarter of 2024. The concentration of the main players in this space has since been in large-cap companies. Your ability to fully develop AI and benefit from its profitability really depends on the size of your business. Basically, the bigger a company is, the better positioned it will be in the AI-driven market this year. Due to this phenomenon, large technology companies, which have all the money in the world to invest in the development of AI, are ensuring that this revolutionary technology will propel the entire technology sector to record levels in 2024 .
According to Alex Kantrowitz, founder of Big Technology, these trends are expected to boost other sectors of the market that have a close relationship with AI. One such sector is energy, which Kantrowitz says is going to see much greater demand from customers who are developing AI and creating and training extensive language models. While many in the AI industry are also working to find ways to use energy more efficiently for AI development, the general consensus seems to be that there is a need to harness more existing energy sources until such methods are found. For this reason, markets could also see demand for nuclear power reach unprecedented levels.
AI in digital advertising
Another sector that could catch up with AI and be propelled higher is digital advertising. With the rise of AI-driven marketing clouds, many advertising-focused businesses are starting to see immense increases in their ROI. According to David Steinberg, CEO of Zeta Global, AI is driving immense growth within the advertising ecosystem, with Steinberg expecting double-digit growth this year. He noted that the launch of ChatGPT was the “great renaissance moment” of AI, which changed our perception of this technology from a product of science fiction to something serious enough to be discussed in company boards of directors. For this reason, Steinberg believes that all companies in the advertising and retail industry are shifting their businesses to integrate high-quality enterprise AI uses into their operations.
Part of the reason AI is taking over the market in this way is the promise it makes: efficiency coupled with revenue growth. By focusing on the development and integration of AI, businesses around the world can increase efficiency while generating higher profits for themselves and their shareholders. Considering this and the fact that AI stocks performed exceptionally well in the second quarter, we’ve put together a list of some AI stocks on sale that investors might want to consider for their portfolios this year.
Our methodology
We first compiled a list of 40 AI stocks by sifting through ETFs and online rankings, including our own rankings. We then selected the 15 stocks with P/E ratios below the S&P 500’s P/E of 24.1 as of September 27 (based on WSJ data) and with expected EPS growth for this year. Stocks are ranked based on their P/E ratios, from highest to lowest. We also discussed the number of hedge funds holding stakes in each stock in the second quarter.
Why are we interested in stocks that hedge funds are piling into? The reason is simple: our research has shown that we can outperform the market by imitating the stocks selected by the best hedge funds. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A laptop and a phone open to Google services on a daily basis.
Alphabet Inc. (NASDAQ:GOOG)
Number of hedge fund holders: 165
Expected profit growth: 31.9%
Price/earnings ratio: 21.6
Alphabet Inc. (NASDAQ: GOOG) is a leading technology company providing interactive media and communications services. She is based in Mountain View, California. The company is an active and pioneering player in the field of AI and is also behind Gemini, a major language model. Additionally, its Google Cloud platform is one of the best choices for businesses and developers to build AI and ML applications.
Alphabet Inc. (NASDAQ: GOOG) is a company with immense financial strength as it has managed to generate significant profits since its IPO 20 years ago. The company reported net income of $23.5 billion in the second quarter alone, which translated to a net profit margin of 28%. With such financial stability, the company’s involvement in the AI space has led many investors to consider it one of the top AI stocks to buy.
Today, almost all of Alphabet Inc.’s (NASDAQ: GOOG) products and services incorporate AI. Some examples of its existing AI-enhanced offerings include Google Maps, YouTube, Gmail, and Google Cloud. With plans to invest at least $12 billion per quarter in capital expenditures, Alphabet Inc. (NASDAQ: GOOG) is expected to go even further in integrating AI, for its own benefit and that of its shareholders.
Considering these factors, the company’s current valuation and P/E ratio of just 23.5 points make Alphabet Inc. (NASDAQ: GOOG) a real bargain in the AI market today.
There were 165 hedge funds long Alphabet Inc. (NASDAQ: GOOG) in the second quarter, with a total stake value of $22.01 billion.
Capital of Diamond Hill mentioned Alphabet Inc. (NASDAQ: GOOG) in its Q2 2024 Investor Report letter:
“Our largest individual contributors in the second quarter included Amazon, Texas Instruments and Alphabet Inc. (NASDAQ:GOOG). Media and technology company Alphabet also continued to generate strong results in its search, YouTube advertising, YouTube subscription and cloud computing businesses. Stocks rose in an environment that continues to favor large-cap technology companies.
GOOG overall ranks 14th on our list of AI stocks for sale. Although GOOG is an exceptional investment, we believe AI stocks show promise in terms of high returns and in a shorter time frame. If you’re looking for an AI stock that’s more promising than GOOG and is trading at less than 5x earnings, check out our report on cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley And Jim Cramer says NVIDIA ‘has become a wasteland’.
Disclosure: None. This article was originally published on Initiated Monkey.