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one artificial intelligence (AI) the stock that has gained the interest of many institutional investors lately is alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). At the end of the third quarter, the stock was one of the top three holdings of the funds of several prominent hedge fund billionaires, including Bill Ackman’s Pershing Square Capital, Chase Coleman’s Tiger Global Management and Philippe Laffont’s Coatue Management.
It’s easy to see why these billionaires have been drawn to Alphabet stock. Shares were very cheap in early 2025 as some investors worried that AI would put pressure on the company’s core Google search business. Those fears turned out to be overblown, however, and Alphabet has turned the tables to be seen as one of the best-positioned AI companies moving forward.
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Alphabet’s strength lies in the fact that it has the most comprehensive AI stack. That starts with its tensor processing units (TPUs), which are custom AI chips it developed more than a decade ago that have been tightly integrated into its ecosystem and improved over the years. While other companies try to catch up in the custom AI chip race, Alphabet’s TPUs are battle-tested and highly regarded, giving it a structural cost advantage when it comes to running AI workloads. It has even started allowing customers to start deploying its chips through its Google Cloud cloud computing business, creating another stream of income.
At the same time, Alphabet has trained its world-class Gemini Large Language Model (LLM) on its chips. Gemini is now considered one of the best AI models in the world, and Alphabet has infused its capabilities into its products. In addition to its standalone app, which has been gaining market share, it’s also helping drive the growth of Google Search through newer AI-powered features like AI Overviews, Lens, and Circle to Search. Perhaps the biggest game changer, however, is the AI mode, which allows users to easily switch between traditional search and an AI chatbot without having to switch apps.
Meanwhile, Alphabet’s distribution and ad network advantages remain. Through ownership of the Chrome browser and Android smartphone operating system, along with a search revenue sharing agreement with Applethe company is the gateway to the Internet for most people. Meanwhile, its massive ad network can help you easily monetize search and AI chat users.
