Summary:
Billionaire investor Bill Ackman, known for his value-focused investment strategy akin to Warren Buffett, has allocated 14% of Pershing Square Capital Management’s assets to Alphabet, a leader in artificial intelligence (AI). Despite initial skepticism about Alphabet’s AI capabilities, Ackman capitalized on its undervaluation, citing the company’s robust data resources, distribution advantages, and long-standing AI expertise. Alphabet’s dominance in AI, exemplified by its Gemini models and Google Cloud Platform, positions it as a key player in the ongoing AI revolution. The stock remains undervalued, trading below its historical average, offering investors a unique opportunity.
What This Means for You:
- Investment Opportunity: Alphabet’s current valuation presents a chance to invest in a proven AI leader at a discounted price.
- Strategic Positioning: Alphabet’s integration of AI across its platforms ensures long-term relevance and growth potential.
- Risk Awareness: Regulatory scrutiny and AI’s impact on core revenue streams like Google Search are key factors to monitor.
- Future Outlook: Alphabet’s substantial capital expenditures in AI reinforce its commitment to maintaining a competitive edge.
Original Post:
Billionaire Bill Ackman, who follows an investment philosophy similar to Warren Buffett, has exposure in his Pershing Square Capital Management hedge fund to the artificial intelligence (AI) boom. That might go against his firm’s usual focus of buying retail-based businesses.
But since this particular company had its initial public offering in 2004, shares have risen 6,930% (as of July 9). Had you made a $1,000 investment in this top AI stock back then, you’d have about $70,000 today.
Continue reading to learn what business this is and whether or not it should be in your portfolio.

Image source: Getty Images.
Already a leader in AI
Through both Class A and Class C shares, Pershing Square had 14% of its assets (as of March 31) in Alphabet (GOOGL 1.46%) (GOOG 1.47%). The hedge fund first purchased the stock in the first quarter of 2023, at a time when the company was losing investor interest as OpenAI’s ChatGPT became the talk of the town. There were concerns Alphabet had already lost the AI race. But in typical fashion, being greedy when others are fearful, Ackman became an Alphabet shareholder.
The billionaire highlighted many of the company’s favorable qualities as they relate to AI. Pershing Square called out Google’s distribution advantage, with the habits consumers have of using Alphabet’s products and services. The business also has unrivaled data to train AI models on. And Alphabet has been at the forefront of AI for several years, not just hopping on the bandwagon recently like many others have.
More than two years since Ackman bought the stock, Alphabet remains a power player in the AI world. It has a leading family of models in Gemini. Its crown jewel, Google Search, has an AI Overviews feature that now has 1.5 billion monthly users. And the Google Cloud Platform offers a long list of AI tools to clients, which should register strong demand.
“All 15 of our products with a half a billion users now use Gemini models,” CEO Sundar Pichai said on the first-quarter 2025 earnings call.
But perhaps most importantly, Alphabet has the financial resources to stay ahead. Management plans to spend $75 billion on capital expenditures this year. That’s a lot of money. However, when the business generates tens of billions of dollars in net income each quarter, having large capital expenditures is easy.
There is certainly a lot of hype surrounding the AI craze. Some forecasters think this technology will completely upend entire industries, drastically cut jobs, and/or provide a substantial boost to economic productivity. It’s really anyone’s guess what the long-term implications will be. Things will take time to play out.
But here’s why Alphabet is in such an enviable position. Even before AI started getting all the attention, Alphabet already had some of the most popular and widely used internet properties on the face of the planet. Management is simply leveraging AI to better serve users, which is a smart strategic decision regardless of how you view this technology’s future.
Shares are trading at a discount to the market
Despite Alphabet’s powerful position in the tech world, especially when it comes to AI, the market still doesn’t fully appreciate the company. Maybe there are still worries about how AI will ultimately impact Google Search, the company’s top moneymaker. Additionally, Alphabet remains in the crosshairs of regulatory bodies, adding uncertainty to the mix.
The stock currently trades at a price-to-earnings ratio of 19.8, reflecting some level of pessimism. That’s significantly below its trailing-five-year average of 25.5. And it shows that shares are selling at a multiple that’s much cheaper than that of the overall S&P 500 index. Investors have the chance to buy an AI leader at a discount today.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
Extra Information:
Top AI Stocks to Watch – Explore other promising AI investments to diversify your portfolio. Google Gemini Explained – Learn more about Alphabet’s advanced AI models.
People Also Ask About:
- What is Alphabet’s AI strategy? Alphabet focuses on integrating AI across its products to enhance user experience and maintain competitiveness.
- Why is Alphabet undervalued? Despite its AI leadership, regulatory concerns and market skepticism keep its valuation low.
- How does Gemini compare to ChatGPT? Gemini offers robust capabilities and is deeply integrated into Alphabet’s ecosystem, giving it a competitive edge.
- Is Alphabet a good long-term investment? Alphabet’s strong financial position and AI advancements make it a promising long-term investment.
Expert Opinion:
Alphabet’s strategic investments in AI and its ability to leverage existing infrastructure make it a formidable player in the tech industry. Investors who recognize its undervaluation today could benefit significantly as AI continues to reshape the digital landscape.
Key Terms:
- AI investments
- Alphabet stock undervaluation
- Google Gemini models
- AI-driven growth
- Tech sector leadership
- AI integration strategies
- Regulatory challenges for Alphabet
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