You might be surprised to learn that Nvidia isn't the most widely owned megacap tech stock owned by the most prominent hedge fund billionaires. According to our research , that title belongs to Google parent company Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) . The stock is owned by 11 of the top 16 billionaire-run hedge funds.
It isn't just the most notable hedge funds that are putting tons of capital into Alphabet. According to Whale Wisdom, which tracks the 13-F filings of thousands of hedge funds and institutional investors, 1,693 filers added shares of Nvidia during the first quarter, the latest for which complete data is available. That's a lot, but makes sense given the surge in AI hype. However, 1,993 of the tracked 13-F filers added shares of Alphabet during the same period. And those are just the stats for Alphabet's Class A shares.
There's a lot to like about Alphabet
Alphabet derives virtually all of its revenue from its Google subsidiary, with the bulk coming from the Google Services segment. This consists of the massively dominant Google Search platform, as well as Gmail, YouTube, Chrome, Android, and a ton of adjacent apps and platforms. Google's platforms are a major part of the daily lives of billions of people around the world. In fact, I used no fewer than four separate Google-owned apps while researching and writing this article.
Don't make the mistake of thinking these parts of Alphabet's business are maxed out. Even though businesses like Search and Android have dominant market shares, AI advancement could help make the company's advertising business more effective. In fact, YouTube ad revenue was one of the biggest growth drivers in the most recent quarter.
There's also the Google Cloud segment, its cloud services component, which is a direct competitor to Amazon 's AWS and Microsoft 's Azure. It currently has the No. 3 market share, but it has been gaining on its larger rivals, plus the market opportunity itself is growing rapidly -- especially as AI technology evolves. In fact, the cloud computing market is expected to grow to $2.5 trillion by 2032, roughly five times its 2022 size. Even if Alphabet simply maintains its share of the market, that's a big tailwind.
Alphabet is a cash-rich, high-margin business that continues to grow rapidly (and not just in the cloud business). It has about $108 billion in cash and short-term investments on its balance sheet and generated $74 billion in net income last year alone. It has produced a 26% net margin over the past four quarters. Its revenue grew by 15% year over year in the first quarter, with earnings soaring at an even faster rate, and there's a long history of steady growth, even in difficult environments. Last but certainly not least, Alphabet just announced its first-ever dividend and authorized a $70 billion share buyback.
In addition to Google, Alphabet has its "other bets" segment that includes several earlier-stage start-ups. Self-driving technology company Waymo is the most notable, but there are others.
AI potential with a down-to-Earth valuation
Even though it's at its 52-week high, there's a solid case to be made that Alphabet is the most attractive of the Magnificent Seven stocks right now. With massive margins, tons of cash, an enormous opportunity to grow its cloud services business, and a reasonable P/E of below 30 despite growing earnings by 27% year over year in 2023, Alphabet could be a smart AI stock to consider right now.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Matt Frankel has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. 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 .
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