A veteran Wall Street analyst says the market’s most powerful AI plays may still be hiding in plain sight.
In a new Fox Business interview, former Citigroup executive and current Evercore ISI senior managing director Mark Mahaney outlines which tech giants he believes are best positioned for the next phase of the AI trade.
He says he has his eye on Alphabet (GOOGL) following a landmark court ruling, where a federal judge allowed Apple to maintain its lucrative default search arrangement with Google.
“It’s still our top pick… We’ve had a pretty big run, though, in Google. We made this our top pick at $160. We went through the DOJ trial, and Google essentially won that. And now there’s increasingly the belief in the market that they’re no longer an AI loser, but they may be an AI winner.”
He points to multiple growth drivers underpinning Google’s strength.
“They’re getting more credit for Waymo. This is a YouTube asset. The future of TV almost is showing some accelerating growth, and Google Cloud is at 30%-plus growth. So you put all that together, you still get a stock that trades at 22, 23 times earnings, a small premium to the market for what I think is a tech utility.”
Mahaney says Alphabet’s position reflects balance — steady growth with moderate valuation — but its “setup isn’t as aggressively open” as it was a few months ago.
Looking at the social media giant Meta (META), Mahaney says he expects the company’s aggressive AI investments to drive long-term upside, setting a price target of $930.
“It’s not one of our top picks, but this is also trading 23, 24 times earnings. So it’s a few turns higher, a little bit more expensive than Google. But it’s got better top-line growth now.
The company has told people they’re going to lean aggressively into capital expenditure spending for AI And they’re hiring a lot of the top talent in the Valley — in the world, really — for AI, and they mean it. I think they’re going to give a cost outlook that’s going to be pretty aggressive, and that could be a risk to the stock near term.
But long term, as a play off of social media, they’ve been able to apply artificial intelligence to dramatically improve their platform for consumers and for advertisers.”
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