Google Parent Alphabet Sold 79% of Its Stake in Snowflake and Is Piling Into This Supercharged Artificial Intelligence (AI) Stock Instead

Core Insights - The article discusses the shifting investment strategies of Alphabet, particularly its significant reduction in holdings of Snowflake and substantial increase in shares of Freshworks, reflecting broader trends in the AI and CRM sectors [1][6][12]. Group 1: Snowflake - Alphabet reduced its stake in Snowflake by 421,050 shares, representing a 79% decrease from the end of June, moving it out of the top-10 holdings by market value [6]. - Snowflake maintains competitive advantages with its cloud-based platform and AI capabilities, allowing clients to create generative AI applications [7]. - The company has adopted a pay-as-you-go pricing model, which has resonated well with users [8]. - However, Snowflake's valuation is concerning, with a forward P/E ratio of 135 and a price-to-sales ratio close to 10, while revenue growth is projected to slow to 26% in fiscal 2025 and 23% in fiscal 2026 [9]. - Economic concerns, such as a potential U.S. recession, may impact Snowflake's performance, especially given its high valuation [10]. Group 2: Freshworks - Alphabet significantly increased its investment in Freshworks, acquiring 3.87 million shares in the September-ended quarter and raising its total position by 302% over the past year [12]. - Freshworks is well-positioned in the growing CRM software market, which enhances labor efficiency and sales for consumer-facing businesses [12]. - The integration of AI into Freshworks' CRM solutions, such as the Freddy AI Agent, enhances customer interactions and operational efficiency [13]. - Freshworks reported a 22% increase in sales for the September-ended quarter, raising its full-year sales expectations to $715.1 million [14]. - The company has expanded its customer base, with a 14% increase in customers contributing at least $5,000 in annual recurring revenue and a net dollar retention rate of 107% [15]. - If Freshworks achieves over 30% average annual earnings growth through 2028, its current forward P/E of 32 could be considered attractive [16].