New
Here's Billionaire Investor Bill Ackman's Favorite Artificial Intelligence (ai) Stock -- And Why It's A No-brainer Buy For 2025
Bill Ackman is outspoken. He's passionate. And he's one of the wealthiest people in the world, with a net worth of over $9 billion.
Ackman doesn't talk much about artificial intelligence (AI), but that doesn't mean he isn't interested in profiting from the game-changing technology. Here's Ackman's favorite AI stock -- and why it's a no-brainer buy for 2025.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »
An easy choice
We don't have to scrutinize Ackman's investments and public comments to pick his favorite AI stock. His Pershing Square Capital Management hedge fund owns only 10 stocks. Two of them focus on AI -- and they belong to the same company -- Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
At the end of the third quarter of 2024, Pershing Square owned 7.55 million Alphabet Class C shares and 3.99 million Alphabet Class A shares. Together, the two stocks made up roughly 14.9% of the hedge fund's total portfolio.
Ackman first initiated a position in Alphabet in early 2023 when OpenAI's ChatGPT was taking the world by storm. Alphabet's Google unit followed by introducing its first generative AI product, Bard. However, as Ackman told CNBC in a September 2023 interview, "Google really fumbled their offering."
Alphabet's shares sank after the public relations black eye experienced with Bard's launch, and Ackman took advantage of the opportunity to load up on the stock. He told CNBC that Google "will be a dominant player in AI for the very, very long term."
Why Alphabet is a no-brainer buy for 2025
That was then. Alphabet stock has soared nearly 90% since the end of the first quarter of 2023 when Ackman first invested in it. Is it still a no-brainer buy as 2025 approaches? I think so.
For one thing, Alphabet's Google unit isn't fumbling and stumbling with its AI initiatives anymore. This month alone, Google has launched four powerful new AI products.
On Dec. 3, Google Cloud introduced the Image 3 image generation model and Veo video generation model on its Vertex AI platform. On Dec. 11, Google rolled out Gemini 2.0, its most powerful large language model (LLM) yet. One day later, it launched Google Agentspace, a new platform that enables customers to build and deploy AI agents that can automate business functions.
Unsurprisingly, Google Cloud's business is booming. In Q3, the unit's revenue jumped 35% year over year to $11.4 billion. Google Cloud should have tremendous growth prospects as more organizations migrate to the cloud over the next decade, with AI accelerating this shift.
Google also recently announced a breakthrough in quantum computing. Its Willow chip can exponentially reduce quantum computing errors. This could pave the way for ultimately building a quantum computer that's useful for addressing real-world challenges.
Don't overlook the opportunity for Alphabet's Waymo self-driving car unit, either. Waymo already offers autonomous ride-hailing services in San Francisco, Los Angeles, and Phoenix. It's planning to expand into Austin, Atlanta, and Miami. The robotaxi market could explode over the next several years, and Waymo is poised to be one of the biggest winners.
What about threats to Alphabet's business?
One objection to my bullish take on Alphabet is that the company faces serious regulatory threats. A federal judge ruled that Google acted illegally in monopolizing the search engine market.
However, Google is appealing this decision. I think it's way too early to assume that the company will be negatively impacted in a way that overshadows its tremendous growth potential.
Others predict that generative AI will disrupt Alphabet's Google Search business and cause the unit's revenue to decline. So far, though, the opposite has proven to be the case.
Google Search revenue increased 12% year over year in Q3 despite competition from Microsoft's Bing and Perplexity AI. Maybe OpenAI's new search engine that's tied into ChatGPT will hurt Google Search, but I wouldn't bet on it at this point.
I think these concerns are already baked into Alphabet's share price. The stock trades at 22 times forward earnings, the lowest valuation among the so-called "Magnificent Seven" stocks.
Will Ackman add to his hedge fund's position in Alphabet in 2025? I don't know. However, I believe the stock remains a great pick for long-term investors.
Should you invest $1,000 in Alphabet right now?
Before you buy stock in Alphabet, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $799,099!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of December 16, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keith Speights has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
