Alphabet(US:GOOG) The Motley Fool·2025-03-30 13:45Core Viewpoint - Bill Ackman, a billionaire hedge fund manager, holds only one AI stock, Alphabet, which is part of the "Magnificent Seven" [1][2] Company Overview - Pershing Square Capital Management, led by Ackman, has positions in just 10 public companies, contrasting with the broader trend of hedge funds holding numerous stocks [2] - Alphabet is recognized for its "underappreciated leadership" in the AI sector, supported by its diverse operations including Google, YouTube, and Google Cloud Platform (GCP) [3][4] Financial Performance - In 2024, Alphabet's advertising revenue reached $264.6 billion, marking an 11% year-over-year increase, with strong demand for advertising on Google and YouTube [6] - GCP's revenue grew by 30% last year, totaling $43.2 billion, with operating profit of $6.1 billion, more than tripling from 2023 [7] - Alphabet has shown consistent improvement in profit margins, free cash flow, and earnings, indicating strong reinvestment capabilities in R&D and AI development [9] Market Position and Valuation - Despite competition from Meta, TikTok, Amazon, and Microsoft, Alphabet remains a leader in digital advertising and cloud computing [10][15] - Alphabet's forward price-to-earnings (P/E) ratio is 18.7, below its five-year average, suggesting a mixed investor sentiment regarding its competitive position in AI [12] - Google and YouTube continue to be the most visited websites globally, providing Alphabet with a significant advantage in attracting digital advertisers [14] Growth Potential - GCP's growth rate of 30% is expected to outpace Alphabet's overall business growth, positioning cloud infrastructure as a major growth driver, potentially surpassing digital advertising in importance [15] - The narrative surrounding Alphabet suggests it is struggling against competition, but improving financial metrics indicate a different story, suggesting the stock is undervalued [16]