High-Net-Worth Individuals are Investing Heavily in This Leading Artificial Intelligence (AI) Shares. Should You Match Their Strategy?
High-Net-Worth Individuals are Investing Heavily in This Leading Artificial Intelligence (AI) Shares. Should You Match Their Strategy?
The talk about artificial intelligence (AI) on both Wall Street and Main Street keeps escalating. The phenomenal surge of Nvidia, whose revenue skyrocketed from $17 billion in 2021 to $96 billion in the past year, significantly boosted major stock market indexes to record-breaking heights.
NVIDIA Revenue (TTM) data by YCharts
In response to OpenAI's release of ChatGPT, large tech companies are in a rush to develop increasingly sophisticated generative AI technology. As per Next Move Strategy Consulting's estimates, the entire AI market could reach over $1.8 trillion by the end of the decade.
With numerous companies fiercely competing for part of this market, determining which ones to invest in can be tough. Examining what billionaires' hedge funds are investing in can be enlightening. Investment managers managing over $100 million are required to file 13F forms with the Securities and Exchange Commission 45 days after each quarter ends, revealing all their stock sales and purchases made in that quarter. The latest filings were recently released. Here's one stock that was a favored purchase by experienced Wall Street professionals.
Alphabet's AI Future
Alphabet (GOOGL -1.11%) (GOOG -1.16%), Microsoft, Meta Platforms, and Amazon are projected to spend $189 billion on AI infrastructure in 2024. Google DeepMind is Alphabet's team dedicated to AI research and development. Gemini, its ChatGPT equivalent, was integrated into Google Search and recently launched as an iPhone app.
Alphabet is also reportedly developing a bot named Project Jarvis that will automate tasks like research, shopping, or booking trips through Google Chrome. Plus, 60% of generative AI start-ups utilize Google Cloud, according to Technology Magazine.
Tudor Investment, which controls more than $27 billion, increased its stake in Alphabet by 461% in the third quarter to 543,600 shares worth approximately $95 million as of Monday morning. Although this investment represents less than 1% of the fund's total assets, it was a substantial increase. Viking Global Investors, which also manages over $27 billion, initiated a new position in Alphabet in Q3 to the tune of 1.3 million shares (worth around $227 million).
In addition, Bridgewater Associates (managing $17.6 billion) owned more than 4 million shares of Alphabet, and Tiger Global (managing $23.4 billion) owned more than 10 million shares. However, it's important to note that these were the stock positions they held as of Sept. 30. The situation may have changed since then.
One reason for their decisions to buy Alphabet stock might be the company's recent remarkable results. Revenue increased 15% year over year in Q3 to $88 billion, while operating income skyrocketed 34% to $28.5 billion. Moreover, cash generated from operations was $31 billion for the quarter and $86 billion year to date. This enables it to continue investing in infrastructure, make dividend payments, and buy back stock.
Alphabet stock currently trades at about 23 times earnings, which is slightly lower than its five-year average of 26 and lower than the valuations of big tech players like Microsoft and Meta.
Given that numerous billionaires are taking substantial stakes in Alphabet, it adds credibility as an investment. Moreover, Alphabet's investments in AI, financial results, and valuation make it an attractive long-term investment opportunity.
Investors managing large sums of money, such as Tudor Investment and Viking Global Investors, have significantly increased their holdings in Alphabet, demonstrating their confidence in the company's potential in the AI market. This finance-driven decision to invest in Alphabet, whose revenue and operating income have shown remarkable growth, makes it an appealing long-term opportunity for those interested in money management and investing in AI technology.