10 AI Stocks in Focus Amid U.S. – China Tariff Pause

2. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 234

Alphabet Inc. (NASDAQ:GOOG) is an American multinational technology conglomerate holding company wholly owning the internet giant Google, amongst other businesses. On May 12, D.A. Davidson reiterated the stock as “Neutral,” stating that the company should be broken up. The analyst, Gil Luria, called for a complete Alphabet breakup in a report following two Department of Justice antitrust cases against Alphabet. The first case focuses on the internet search business while the other on its advertising business.

“We believe the only way forward for Alphabet is a complete breakup that would allow investors to own the business they actually want — the top competitors to NFLX, AWS/ Azure, TTD and UBER/TSLA. We remain NEUTRAL rated, but would see GOOGL as the top mega cap pick if it proceeded with a complete break up”

Federal judges have ruled that Google-parent Alphabet has illegally used monopoly-building techniques to dominate online advertising and search. A key part of the ruling focused on multibillion-dollar payments Google makes to Apple, with the DOJ requesting that Google be forced to sell its Chrome browser and take other measures.

Investors have also been worried about Google’s search business amid the artificial intelligence-driven competition coming from ChatGPT and others, with the company deploying AI Overviews in the U.S. in mid-2024.

“Google Search ad revenue growth could persist well past the point the business is damaged since advertisers still don’t have an alternative. Only after Apple switches defaults and ChatGPT comes in and ChatGPT turns on ads, will we see the impact on revenue. That may take several quarters, which means the overhang is not going away.”