We recently published a list of Top 10 Hottest AI Stocks According to Latest Analyst Ratings and News. With Alphabet Inc (NASDAQ:GOOG) ranking fourth on the list, the company deserves a closer look.

AI stocks have declined significantly in recent weeks and analysts believe this is exactly the healthy correction long-term investors have been waiting for. According to Bloomberg, Rob Sluymer, technical strategist at RBC Wealth Management, said AI stocks have stabilized at a level they can hold for the rest of the year. The analyst said technical indicators now show that AI stocks have moved from overbought to oversold territory.

Many others agree with Sluymer. Wedbush’s Dan Ives reiterated his view that we are still in the early stages of the AI ​​bull market on a recent CNBC show.

For this article, we’ve selected 10 AI stocks that are making waves based on recent earnings, analyst ratings, or important industry news. For each company, we’ve mentioned the number of hedge fund investors. Why do we care about the stocks hedge funds invest in? The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (Further details can be found here).

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Alphabet Inc (NASDAQ:GOOG)

Number of hedge fund investors: 165

Alphabet Inc Class C (NASDAQ:GOOG) is in the spotlight after the company unveiled Pixel 9 phones that feature a built-in artificial intelligent assistant called Gemini Nano. However, shares are under pressure amid reports that the U.S. Department of Justice is considering splitting up Google. Jefferies said in a new note that the market does not place value on Google’s cloud and hardware divisions. Jefferies analysts believe Alphabet Inc Class C (NASDAQ:GOOG)’s market share in smartphones and devices remains minimal, making it difficult to gain a foothold. However, they see generative AI as a potential offset. Jefferies maintained its buy rating on Google, calling Gemini the most personal generative AI assistant on the market.

Jefferies also emphasized that Google and Meta Platforms (META) are well positioned to benefit from the consumer AI boom.

Alphabet Inc Class C (NASDAQ:GOOG) shares recently fell following reports that OpenAI is working on a web search product called SearchGPT. Previously, the stock fell despite strong numbers following the earnings release. Second-quarter revenue grew 14% year-over-year, driven by search and cloud. At a forward P/E ratio of 22, analysts believe Alphabet Inc Class C (NASDAQ:GOOG) remains one of the cheapest AI stocks on the market as the valuation remains low amid fears of overreaction.

Despite constant alarms about its search business, Alphabet Inc Class C (NASDAQ:GOOG)’s search revenue grew by about 13.7% year-on-year in the second quarter. At the end of June, Google had a market share of about 91.06% in the search engine market, only 1.65% less than in December 2019. With AI insights and other search initiatives, Alphabet Inc Class C (NASDAQ:GOOG) will be able to fend off any competitors given its market dominance.

Cloud and YouTube are two major strong catalysts for Alphabet Inc Class C (NASDAQ:GOOG) shares. In the second quarter, Alphabet’s cloud revenue rose 28.8% to $10.35 billion, beating analysts’ forecasts of $10.16 billion. Alphabet Inc Class C (NASDAQ:GOOG) is on track to generate $100 billion in revenue from YouTube Ads and Google Cloud by the end of 2024.

Cooper Investors Global Equities Fund commented on Alphabet Inc. (NASDAQ:GOOG) in its Investor letter Q2 2024:

While this positioning is painful in the short term, we see significant embedded value in our portfolio. We also see significant risks and uncertainties in the AI ​​theme that are not reflected in the value latency of many stocks that have risen sharply.

“To return to the AI ​​story, today around 10% of the portfolio’s capital is invested in TSMC and Alphabet. In the meantime, Alphabet can leverage several value levers, including AI-powered search, YouTube (now the must-have streaming platform for young people) and Google Cloud.”

Overall, Alphabet Inc (NASDAQ:GOOG) ranks 4th on Insider Monkey’s list of the title Top 10 Hottest AI Stocks According to Latest Analyst Ratings and News. While we recognize the potential of Alphabet Inc (NASDAQ:GOOG), we believe AI stocks promise higher returns and do so in a shorter period of time. If you’re looking for an AI stock that’s more promising than GOOG but worth less than five times its earnings, read our report on the cheapest AI stock.

READ MORE: Analyst sees a new $25 billion “opportunity” for NVIDIA And Jim Cramer recommends these stocks.

Disclosure: None. This article was originally published on Insider Monkey.