Competitive Threat Pulled Down Alphabet (GOOG) in Q1

Diamond Hill Capital, an investment management company, released its “Long-Short Strategy” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The market was mixed in the first quarter of 2025, due to the uncertainty caused by the new administration’s avalanche of activity. However, the portfolio outperformed the Russell 1000 Index and the blended benchmark (60% Russell 1000 Index/40% Bloomberg US Treasury Bills 1-3 Month Index) in the quarter. In Q1, both long and short books generated relative tailwinds, with the short book underperforming the index, while the long book was positive, despite the index being negative. In addition, you may look at the fund’s top 5 holdings to learn about its best picks in 2025.

In its first-quarter 2025 investor letter, Diamond Hill Long-Short Strategy highlighted stocks such as Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, offers various platforms and services operating through Google Services, Google Cloud, and Other Bets segments. The one-month return of Alphabet Inc. (NASDAQ:GOOG) was -3.59%, and its shares lost 9.61% of their value over the last 52 weeks. On June 24, 2025, Alphabet Inc. (NASDAQ:GOOG) stock closed at $167.74 per share, with a market capitalization of $2.029 trillion.

Diamond Hill Long-Short Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

“Other bottom individual contributors in Q1 included our long positions in Microsoft, Alphabet Inc. (NASDAQ:GOOG) and Taiwan Semiconductor. Media and technology company Alphabet faces GenAI competition to its search business from rivals such as OpenAI’s ChatGPT, Perplexity and others. However, we believe the advent of GenAI should expand the addressable search market, and Alphabet is responding proactively to increased competition with equal or superior products while managing ongoing antitrust challenges, diversifying its revenue base with other Google products and reducing costs.”

Alphabet Inc. (GOOG)’s AI Ad Strategy Expands Reach—But Analyst Keeps Neutral Stance

A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.

Alphabet Inc. (NASDAQ:GOOG) is in 7th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 164 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the first quarter which was 174 in the previous quarter. In the first quarter of 2025, Alphabet Inc. (NASDAQ: GOOG) achieved a revenue of $90.2 billion, representing an increase of 12% from Q1 2024. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Alphabet Inc. (NASDAQ:GOOG) and shared Baron Fifth Avenue Growth Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of GOOG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.