As you may be aware, Google and YouTube parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is a member of the “Magnificent Seven” group of technology companies. However, you might not feel an immediate urgency to buy GOOG stock. Still, Alphabet stock’s momentum from 2023 is likely to continue into 2024. Hence, a moderately sized share position in Alphabet is at least worth considering.
After all, Alphabet has notable investors like Pershing Square’s Bill Ackman and Duquesne Capital’s Stanley Druckenmiller. Ultimately, you must make your own decisions. We give GOOG stock a “B” grade, but it doesn’t have to be your top portfolio allocation. Yet, there are reasons to conduct your due diligence on Alphabet as the company has its strong points.
GOOG Stock: Momentum vs. Value
Do billionaires like Ackman and Druckenmiller know something about Alphabet that everyone else doesn’t know? Maybe, but probably they just want to invest in winners with momentum. Lately, the market’s momentum has been with technology giants, and Alphabet certainly fits into that category.
Like other “Magnificent Seven” stocks, Alphabet stock has rallied throughout 2023 and recovered from every share-price dip. The forward momentum is undeniable, but then, do Ackman and Druckenmiller see a good value when they invest in Alphabet?
It’s hard to know for certain. Alphabet’s GAAP trailing 12-month price-to-earnings (P/E) ratio and other commonly cited valuation metrics are much higher than their sector averages. Yet, Alphabet’s true value isn’t necessarily expressed in these ratios.
Instead, Alphabet’s value and GOOG stock’s momentum are predicated on the company’s expected future growth and leadership status. Alphabet is among the most important artificial intelligence (AI) technology developers, and that’s a significant theme in 2023.
Here’s a notable example of Alphabet’s drive to stay ahead of the pack. Seeking to maintain its leadership status in the AI field, Alphabet is reportedly in talks to possibly acquire generative AI startup Character.AI.
According to a Reuters report, Character.AI “allows people to chat with virtual versions of celebrities like Billie Eilish or anime characters.” Plus, it lets users create “their own chatbots and AI assistants.”
Acquiring Character.AI could serve Alphabet well as the company strives to upgrade its generative AI offerings. It’s not difficult to envision Alphabet integrating Character.AI’s functionalities into Google and perhaps YouTube as well.
Alphabet Opens Up Its AI Chatbot to Younger Users
Speaking of generative AI, Alphabet had a notoriously bad rollout of its Bard generative AI chatbot earlier this year. However, Bard may regain its footing now, and Alphabet is even expanding its access to a new, younger user base.
Specifically, Alphabet is rolling out a version of Bard specifically for teenagers. With this Bard iteration, teens can “ask Bard for writing tips for a class president speech, suggestions for what universities to apply to, or ways to learn a new sport like pickleball,” according to a Google blog post.
If all goes according to plan, Bard for teenagers will also help solve math problems (without giving away the answer, hopefully). This version of Bard will reportedly include “safety features and guardrails to help prevent unsafe content.”
Since younger users seem to be an ideal demographic for generative AI applications, this version of Bard could enhance Alphabet’s standing in the AI technology space. It will be interesting to see whether Bard for teenagers gains traction and gives competing technology giants a run for their money.
Alphabet Stock: Consider Buying It With This Other Stock
Alphabet provides its shareholders with decent exposure, but perhaps not the best exposure, to the generative AI market. We’ve assigned a higher “A” grade to Microsoft (NASDAQ:MSFT) and a slightly lower “B” grade to GOOG stock. A main reason is that Alphabet seems to lag behind first mover Microsoft in generative AI technology.
However, it’s possible to hedge one’s bets by investing in both Microsoft and Alphabet. Both companies appear to be making strides in generative AI. So, feel free to consider investing like Ackman and Druckenmiller, and think about adding some Alphabet stock to your portfolio.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
