Billionaire financier Bill Ackman's Preferred Artificial Intelligence (AI) Share – Explained as an Intelligent Investment Opportunity for 2025
Bill Ackman is known for his outspokenness and passion, and he's also one of the wealthiest individuals globally with a net worth over $9 billion.
When it comes to artificial intelligence (AI), Ackman may not often voice his opinions, but his investments suggest he's keen on tapping into this game-changing technology's potential profits. Here's the AI stock Ackman finds most appealing for 2025, and why it's an excellent buy opportunity.
A clear-cut choice
We don't need to analyze Ackman's disclosures and investments to determine his favorite AI stock. His Pershing Square Capital Management hedge fund holds only 10 stocks, and two of them center around AI. They belong to the same corporation - Alphabet (GOOG 0.10%) (GOOGL 0.07%).
By the end of Q3 2024, Pershing Square owned 7.55 million Alphabet Class C shares and 3.99 million Alphabet Class A shares. These combined stocks made up approximately 14.9% of the hedge fund's entire portfolio.
Ackman invested in Alphabet in early 2023, following OpenAI's ChatGPT's global takeover. Soon after, Alphabet's Google unit launched its first generative AI product, Bard. However, Ackman told CNBC in a September 2023 interview that Google had misstepped with Bard's release.
The stock's price plummeted after Bard's launch, and Ackman seized the chance to bolster his Alphabet holdings. He told CNBC that Google would cement its position as a long-term leader in AI.
Why Alphabet is a no-brainer buy for 2025
Things have changed since then. Alphabet stock has soared nearly 90% since Ackman initially invested in it in Q1 2023. Is it still a no-brainer buy as 2025 approaches? I think so.
For starters, Alphabet's Google unit is no longer stumbling with its AI projects. In just December alone, Google has released four powerful new AI products.
On December 3, Google Cloud introduced the Image 3 image generation model and Veo video generation model on its Vertex AI platform. On December 11, Google introduced Gemini 2.0, its most advanced large language model (LLM) yet. The following day, it launched Google Agentspace, a platform that enables businesses to automate functions using AI agents.
It's no surprise that Google Cloud's revenue is skyrocketing. In Q3, the division's revenue increased by 35% from the previous year to $11.4 billion. Google Cloud is expected to grow substantially as more organizations transition to the cloud over the next decade, with AI accelerating this migration.
Alphabet also made groundbreaking strides in quantum computing. Its Willow chip significantly reduces quantum computing errors, potentially paving the way for the creation of a practical, real-world quantum computer.
Don't overlook the prospect of Alphabet's Waymo self-driving car unit. Waymo currently offers autonomous ride-hailing services in San Francisco, Los Angeles, and Phoenix. It's planning to expand to Austin, Atlanta, and Miami. The robotaxi market could explode in the coming years, and Waymo is well-positioned to be a significant player.
Potential challenges for Alphabet's business
Some argue that Alphabet faces formidable regulatory threats. A federal judge ruled that Google had violated antitrust laws in monopolizing the search engine market.
However, Google is planning to appeal this decision. It's hard to predict if the company will suffer significant setbacks as a result of the ruling.
Others believe that generative AI will disrupt Google Search and lead to a decline in its revenue. However, Google Search revenue actually increased by 12% in Q3 despite competition from Microsoft's Bing and Perplexity AI.
OpenAI's new search engine, which is linked to ChatGPT, may cut into Google Search's market share, but it's too soon to tell. I think these concerns are already factored into Alphabet's share price, which currently trades at a relatively low multiple of forward earnings compared to other "Magnificent Seven" stocks.
Will Ackman augment his hedge fund's Alphabet position in 2025? I can't predict that. However, I believe the stock remains an excellent choice for long-term investors.
In light of Ackman's substantial investment in Alphabet, it's evident that he sees strong potential for financeable returns from the tech giant's advancements in AI technology, such as its generative AI product, Bard. His continued interest in Alphabet, despite initial missteps, underscores his belief in the company's ability to cement its position as a long-term leader in the AI industry.
As the company's investments in AI continue to yield positive results, with Google Cloud's revenue skyrocketing and significant strides in quantum computing, Alphabet presents an attractive investment opportunity for those interested in the finance and investing sectors, particularly with the potential of Waymo in the autonomous ride-hailing market.
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