5 Best Blue Chip Stocks to Buy According to Hedge Funds

4. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 152

Alphabet Inc. (NASDAQ:GOOG) is a big tech company that is facing more competition as a result of Microsoft incorporating AI into Bing. Although AI makes mistakes, many users nevertheless find the new AI Bing useful. In response, Alphabet Inc. (NASDAQ:GOOG) is expected to launch multiple AI products this year, including the now open to beta testers Bard Chatbot. Given the more competition, Alphabet Inc. (NASDAQ:GOOG) is arguably the riskiest stock on our list even though it has great AI technology and a forward P/E of 17.27 as of March 21.

L1 Capital International Fund commented on Alphabet Inc. (NASDAQ:GOOG) in a Q3 2022 investor letter,

“Two companies, Amazon.com (Amazon) and Alphabet Inc. (NASDAQ:GOOG), detracted more than 0.5% (in AUD) from the Fund’s returns. Both companies reported Q3 2022 quarterly results that were modestly below our expectations. Alphabet’s share price was impacted by concerns that macroeconomic pressures will impact advertising spend, increased commentary that Alphabet’s core search business could be disrupted by open artificial intelligence technologies, particularly from OpenAI’s ChatGPT chatbot (Microsoft is rumoured to be investing $10 billion in OpenAI with the aim of incorporating the technology into Bing, Word and email). Alphabet’s growth in employee numbers is also expected to pressure profitability in a more subdued economic environment.

We have allowed for a softening in advertising in our base case expectations and believe Alphabet’s management will be under increasing pressure to take action to manage its cost base, as many other technology businesses have already done, including Amazon. Disruption to search remains an issue to monitor. However, we consider Alphabet to be at the forefront of developments in artificial intelligence and well placed to defend its core franchise.”