Several hedge fund managers with impressive results bought shares of Alphabet and Meta Platforms in the third quarter.
Meta Platforms uses artificial intelligence to improve engagement and conversion rates of ads on its social media properties.
Alphabet is monetizing artificial intelligence in its digital advertising and cloud computing businesses.
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Actions of Meta platforms(NASDAQ: META) have advanced 13% year-to-date, bringing their market value to $1.6 trillion. Meanwhile, shares of parent Google Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) advanced 64%, taking the company’s market value to $3.7 trillion. Three top hedge fund managers bought both shares in the third quarter.
Millennium Management’s Israeli Englander added 793,500 shares of Meta Platforms and 2.2 million shares of Alphabet. Both stocks rank among his top 10 holdings.
Citadel Advisors’ Ken Griffin added 1.4 million shares of Meta Platforms and 2 million shares of Alphabet. Both stocks rank among his top 10 holdings.
Coatue Management’s Philippe Laffont added 355,000 shares of Meta Platforms and 7.2 million shares of Alphabet. Both stocks are among his top three holdings.
Importantly, all three hedge fund managers outperformed easily S&P 500(SNPINDEX: ^GSPC) in the last three years, which makes them good sources of inspiration. But the said transactions took place in the third quarter, which ended a few months ago. Here’s a more current look at Meta Platforms and Alphabet.
Image source: Getty Images.
Meta has a strong presence in two industries: digital advertising and smart glasses. It owns three of the four most popular social networks, which allows it to collect user data and target media content. This advantage has made Meta the second largest ad technology company in the world. But the company also took an early lead in the nascent smart glasses market.
JPMorgan Chase analyst Dough Anmuth recently wrote, “Meta is in rarefied air in its combination of scale, growth and profitability, as the company’s massive reach and engagement continues to generate network effects and its targeting abilities provide significant value to advertisers.”
Meta relies on artificial intelligence (AI) — from custom semiconductors to large proprietary language models — to reinforce that network effect by increasing engagement and conversion rates of ads on its social media properties. CEO Mark Zuckerberg told analysts, “Our AI recommendation systems deliver higher quality and more relevant content,” leading to more time spent on Instagram, Facebook and Threads.
Meta Platforms is also developing a superintelligence system to integrate with its augmented reality smart glasses. CEO Mark Zuckerberg says glasses will be “our primary computing devices” in the future. If he’s right, Meta — which accounted for 73% of smart glasses shipments in the first half of 2025 — could become a consumer electronics giant in the 2030s.
Wall Street expects Meta’s earnings to grow 17% annually over the three years. That makes the current valuation of 29 times earnings look pretty reasonable. Indeed, among 71 analysts, Meta has an average price target of $842 per share. This represents a 27% increase from the current share price of $661.
Alphabet is the largest ad tech company in the world thanks to its ability to engage consumers with Google Search and YouTube. The company relies on AI to better monetize those web properties. AI Presentations and AI Mode have increased query volume on Google Search, and generative AI tools help YouTube influencers create, edit, and optimize content.
Alphabet also developed an app called Gemini, a generative AI assistant built on a family of large language models of the same name. Gemini now has over 650 million monthly active users and ranks as the second most popular AI assistant behind ChatGPT. Alphabet doesn’t yet sell ad inventory on the platform, but the company can certainly pull that lever in the future.
Meanwhile, Alphabet’s Google Cloud is the third-largest public cloud by spending on infrastructure and platform services and has gained 2 percentage points in market share over the past two years. CONSULTANCY Gartner recently ranked Google as the most capable cloud platform for developing AI applications and Forrester Research ranked as a leader in LLMs.
These accolades suggest further market share gains are likely. Indeed, total cloud sales rose 34% in the third quarter, the second consecutive acceleration, driven by strong demand for Google’s custom AI chips (called TPUs) and generative AI models. Morgan Stanley Analysts forecast Google Cloud revenue growth to accelerate to 44% in 2026.
Wall Street expects Alphabet’s earnings to grow 15% annually over the next three years, making the current valuation of 30 times earnings seem tolerable. Among 75 analysts, Alphabet has an average price target of $330 per share. This represents a 6% increase from the current share price of $310. Investors can buy a small position today if they feel so inclined, but I think Meta is the more attractive of the two stocks.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, JPMorgan Chase and Meta Platforms. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
Billionaires Buy $2 Trillion in Stock AI Hand Over Fist Before 2026 was originally published by The Motley Fool
